Atlas Market Report
February 15th, 2019
Market Commentary ( Key items you need to know) :
- Market Outlook by Ronald E. Lang
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Key items you need to know –
We are now six weeks into 2019 and the overall markets are up essentially 10%+ after an abysmal Q4 2018 and more specifically a disheartening December 2018. After a new tax policy, great earnings, record revenue and Unemployment at all-time lows, why did the markets end up down for the year? We believe most of it was profit harvesting. After 10 years of a Bull Market and a tremendous run after the 2016 Presidential Election, money managers took profits to lock in gains and show good performance numbers. No doubt there were other factors too including several political headwinds that each headline swung markets to the up and downside with whiplash speed. Ultimately, its important to know that technicals failed in Q4 2018, but the fundamentals were and are still sound, thats why the markets recovered so quickly.
The Trade Deal with China seems like the main catalyst that will move our markets higher if there is a deal. Realistically, the breadth and depth of the details are too much to get done by March 1st. Best case scenario is the following; they agree on several items but not all by March 1st. The administration extends their Tariff deadline another 90 to 120 days. The intellectual property issue is going to be the most difficult issue to solve. As we have mentioned before, if there is a comprehensive trade deal completed, look for a 10%-15% move to the upside in the markets. Don’t trade or maneuver your portfolio by headlines such as, “there is real progress with trade talks….”. That means nothing. If you see a headline from China that says, “The Chinese government has walked away from trade talks”, that would be bad. Most of what comes out of the Administration related to Trade Talks is rhetoric. Again, you shouldn’t be trading your portfolio’s on headlines.
Once we get past the budget issues and the border wall rhetoric, look for big headlines and conversation on pharmaceutical pricing and infrastructure legislation. The infrastructure problem has been on-going for many years and several Presidential administrations. Expect there to be bi-partisan legislation on infrastructure by end of 2019, beginning of 2020 the latest.
We get asked a lot about the Cannabis industry and many investors want to find a way to get in for the long-term. Right now there are almost two dozen major companies who are involved or partnered in the Cannabis industry. There are a few very large players that over time looks like they may be the major winners, but some of the smaller more niche companies also have just as much potential too. The companies that will be the winners will use science and logistics better than their competitors in order to succeed in this industry. You are better off looking for an ETF or a Mutual Fund in this business segment and purchasing a basket of these companies in a fund to smooth out the volatility. The price volatility isn’t for the faint of heart, but if you are in it for the long-term, then the short-term price gyrations won’t matter much. Buckle up!
As we’ve mentioned, 2019 should be a good year depending on your level of risk. If you are investing for the long-term with a moderate amount of risk over the next 9-16 months, that should be acceptable. If you are looking to retire in the next 3-5 years, you should consider getting more conservative over the next 12 months to protect as much principal as possible. In some situations you should be looking at select Fixed-Indexed Annuities for 100% principal protection with upside potential. Many of these Fixed-Indexed Annuities could be short-term (3-5 years) at a fixed rate per year depending on your time frame. You need to look at everything and make a plan in 2019, don’t wait until 2020. This also includes your 401(k)/403(b) company retirement plan portfolio’s. You probably have more limited choices for that account allocation, but it should mirror your personal portfolio with risk and time frame.
Ronald E. Lang, Principal
Atlas Wealth Management, LLC
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