MONTHLY NEWSLETTER SEPTEMBER 2018

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1 MONTHLY NEWSLETTER SEPTEMBER 2018 Since bottoming out toward the end of march and even with the volatility, we are still approaching all time highs at the time of this newsletter. Still plenty of events the marketing will be watching. Jobs report is due out shortly, trade embargo's, tariffs, etc.. Its vital to the success of your portfolio to manage the risk and avoid any large losses moving forward. This is more important getting large gains. The key is active management.

2 S&P LONGEST BULL MARKET IN HISTORY Strong economy, strong market; that seems to be the rational that can explain the market surge as of late. The S & P actually hit an all-time record high on August 24, The Nasdaq Composite followed suit. The market s gains were broad-based. Running for the past nine and a half years, the Standard and Poor s 500 Index has risen 325 percent. In that time, the Dow Jones Industrial Average is up 294 percent and the Nasdaq Composite is up 526 percent. This year, the Dow had been in correction territory for around six months and emerged from it on August 27. This was the longest stretch of days at these levels since The market had entered correction territory on February 8. On August 27, the Dow hit 26,049. There are some analysts on Wall Street who argue that the bull market of the 1990s remains the longest bull market. Some others argue the exact date when the current bull market began. But, most agree that on August 24, the market hit a record. a strong economy have all worked well to continue the Part of the success of this long market can be attributed to rally in equities that has been going on for nearly a good monetary policy in past years and great fiscal policy decade. currently. A trade agreement, hammered out with Mexico, also excited investors, sending the Dow up another 259 points This Year s Market on August 27. The agreement calls for producing more When even the Federal Reserve says that the economy automotive parts in the U.S., among other things. looks strong, then Wall Street feels compelled to push the market higher. And, that is what has happened. The Before this lengthy bull market, the next longest market Fed also stuck to their guns and kept to a modest rate ended in March of But, the market s PE increase projection for the balance of The fact that (price/earnings) ratio this time around looks much more the fed chair did not take a more hawkish position told attractive. Stocks are more fairly valued and interest rates Wall Street that inflation remains largely under control. are lower than during the last rally. Good corporate earnings, a pro-business environment and The gains more recently have been largely in domestic 2

3 equities with emerging markets not as strong. On August 24, the Dow Jones Industrial Average hit 25, Stimulus efforts taken by the administration have had a positive impact on the supply side, and businesses have invested in technology and equipment, with better productivity growth as a possible result. This scenario was seen in the late 1990s. Consumer spending has been strong and many retail stocks have reflected this in their earnings. These things have help bolster the rally in the market, despite some volatility along the way. GOLD PRICES HAVE BEEN PLUNGING; WHAT IS CAUSING IT? easing, which was a fed initiative in reaction to the 2008/2009 financial crisis, was being tapered and things had turned a corner. This year, gold has been down about 9 percent. Gold mining stocks have taken a hit as well. That trend only When the world becomes filled with more uncertainty and markets become more volatile and geopolitical unrest is afoot, gold is considered a safe harbor. reversed in late August as the Federal Reserve made it clear that their plan for gradual rate increases would remain in place; no overheated economy. Gold is usually priced in dollars and as the Fed raises rates, more of the During volatile markets of the recent past, many investors safe haven investments will find their way to treasuries. have been driven to gold by putting at least a portion of their portfolios into the precious metal. In the past, it was a safe haven during times of high inflation. In the first half of August, the price of gold hit an 18-month low. That trend happened concurrently with the strengthening of the U.S. dollar. Despite trade tensions, the actions of the Federal Reserve take precedent for most investors who look to gold. By the end of August, the price had broke above the $1,200 dollar mark because of a weaker dollar. Prices were up 4 percent since hitting the year s low in early August. That rally did not continue after a weekend though. A downtrend had begun in 2013, but saw some reversal in 2014 and the first half of After peaking in 2011, Less Reason to Rely on Gold when there was more uncertainty in the economy, gold prices were volatile. Decisions by the Federal Reserve also impacted gold prices during this time. Quantitative The reason for gold s decline may not be so much that investors are losing interest in the precious metal as there are fewer reasons to seek a safe harbor. Many of the 3

4 uncertain geopolitical events that spurred the sales of gold demand for gold jewelry and gold bars. in the recent past, and increased its price, have fallen by the wayside. Going into the holidays, gold sales increase, and demand for the precious metal gets a slight jolt to the upside. The financial crisis that struck Greece, Spain and Portugal Other than that, a flight to safety, and a volatile has been largely mitigated. Talks with North Korea have environment for equities, may be the only things to eased tensions on the Korean peninsula and the South re-stimulate the big investments in the shiny stuff. Those China Sea. Also, the U.S. and Mexico came to an things can always reemerge. agreement on trade. The rally in the equities markets have attracted more of each investment dollar with less directed at a hedging strategy like gold. There are also markets like cryptocurrencies that may be funneling off some of the investments normally allocated to gold. Most of the world s demand for gold comes from India and China. They are responsible for 45 percent of the world s 4

5 Disclaimer: Investment Advisory Services offered through Retirement Wealth Advisors, (RWA) a Registered Investment Advisor. Capital Financial Management NC, Inc. and RWA are not affiliated. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Consult your financial professional before making any investment decision. This information is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Please note that Capital Financial Management NC, Inc. and its affiliates do not give legal or tax advice. You are encouraged to consult your tax advisor or attorney. About the Author K Richard Douglas has worked in the financial services industry for 26 years, with an additional 10 writing about financial and economic topics. He s a former series 9, 10, and 26 registered principal and series 6, 7, and 63 registered representative. Richard has held many financial service industry designations, especially in the retirement planning and compliance mechanism areas.