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Atlas Market Outlook – September 1st, 2019

Money Management Newsletter & More

Atlas Market Report

September 1st, 2019
Market Commentary (Key items you need to know):
  • Market Outlook by Ronald E. Lang
  • Fun Links (always popular)
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Key items you need to know –
Summer is over! Hope you had a chance to enjoy yourself and get some downtime. Besides it being Labor Day Weekend, we know summer is over because the first big Hurricane is about to hit Florida, almost like annual clockwork. Hope everyone stays safe, especially if you life along the southeast coastline. Some very important economic changes happened in the last few weeks. As avid readers of this newsletter know that I’m hardly a doomsayer or ever like to spread fear, but the economic cycle has finally reared its ugly head and began to give us a glimpse into how much longer the Bull market will run. We posted this chart before but its important to know your timeline, whether because you are looking to retire in the next 3 – 5 years or you may be looking for a new job or perhaps thinking about starting a business. The Yield Curve inverted over the last two weeks, specifically the two main yields that matter the most to predict the next recession, the 2-year Note and the 10-year Note. Meaning, the 2-year Note is yielding “more or higher” than the 10-year Note. Typically when that happens we are looking at 16 – 22 months before a recession is determined by two consecutive quarters of negative GDP growth. Remember, the 2/10 yield curve inverted in mid-2007 before the recession hit in Q4 2008, but we felt the slow down before the recession was anointed. Remember, the stock market peaked in October 2007, not September 2008.
The 2/10 yield curve has predicted the last seven(7) recessions. (See Image Below)
Here is your MOST IMPORTANT prediction. We (Ron Lang) is predicting that 3 out of the next 5 years should be “Flat to Down” starting in 2020. The current Presidential Administration will do everything they can not to have the economy slow down significantly before the 2020 election, but at some point it doesn’t matter how much you lower interest rates or stimulate the economy with tax reform and other policies, recessions happen. It is almost as certain as Taxes and Death. This doesn’t mean you exit your positions and take your ball and go home. There are still ways to invest your money to protect yourself. If you are in the position where you need income, you can’t exit the market, but there are key moves you can do in your portfolio to protect yourself.
Below are “some” considerations:
  • Reduce risk in your positions over the next 6 – 12 months.
  • Ease out of your winners and riskier positions. Make a plan to take 25% chucks out over time.
  • Use Call Write (Option Strategies) to protect your upside and limit your downside and generate some additional income.
  • Use Put (Option) Strategies as “insurance” to protect select positions or your portfolio.
  • Purchase Fixed-Indexed Annuities (FIA) with a laddering strategy to protect your principal and give you upside potential. We’d recommend keeping away from Variable Annuities.
  • Setting up a Trust and putting your key assets and investment accounts inside of it to protect your wealth from creditors if things turn very south for you, especially if you own a business.
September notoriously and historically has been the worst month of the year for overall returns, while October is many times the most volatile. Expect volatility to heat up the last four months of the year as the anticipation of potential front runners and their rhetoric on the Democrat side and if there will be anyone on the Republican side that will try and make a run at President Trump as the Party’s Primary Candidate. The news (or entertainment channels covering news) try to gain their ratings by pumping up their own rhetoric on both sides. The “sound bites” that inflame social and economic buttons of the American people WILL affect the markets, both up and down. If you are truly worried about the market and possible swings of 1%-2%+ in a day, then you need to re-position your portfolio sooner than later. Better to be conservative, or very conservative, then to lose sleep on a regular basis. Keep away from the meds, the pharmaceutical companies are doing well enough.
We like to make this newsletter a “quick read” with small bite-sized chucks of topical information so you can understand what’s going on in the markets and economy and if it may affect you, give you time to make the steps necessary to protect yourself or take advantage of it.
In Summary
We are in the last trimester of 2019 and expect the markets to reach prior highs in anticipation of a Trade Deal (or at least Part 1 of an agreement) and Fed easing of Interest Rates. The consumer did not spend as much over the summer as expected, but if the market does reach prior highs heading into November, expect the consumer to spend like its the Gatsby era! This will be good for the markets short-term, but stick to a protective strategy either for each month or quarter through the end of 2019 and 2020.
Authored by
Ronald E. Lang, Principal
Atlas Wealth Management, LLC
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