Commentary on Today's Sell Off

After a big reversal from yesterday’s down opening, stocks recovered quite nicely to close modestly lower.  

"Stocks ended sharply lower today, as losses accelerated into the close and put both the Dow and the S&P 500 into the red for the year, and the Nasdaq into correction territory.

Upbeat results from Boeing Co. were credited with briefly pushing the Dow higher in early morning trading, before investors took an increasingly defensive stance, fleeing for the relative safety of utilities and consumer non-durable shares."1 

After the market closed today, Tesla and Microsoft announced earnings that dramatically beat estimates and have sent both stocks up nicely in aftermarket trading. 

How are major benchmarks faring?

The equity markets sold off rapidly as they breached technical support levels in the last two hours of trading, which triggered electronic trading, exacerbating the market sell off.  

"The Dow Jones Industrial Average DJIA, fell 606.11 points, or 2.4%, to 24,583.42, while The S&P 500 SPX, dropped 84.59 points, or 3.1%, to 2,656.10, its sixth straight losing session. Meanwhile, the Nasdaq Composite Index COMP, shed 329.14 points, or 4.4%, to 7108.4, a performance that put the index more than 10% below its Aug. 29 all-time high, meeting the widely used definition of a market correction. The loss also marked the worst day for the Nasdaq since Aug. 18, 2011."1

October is shaping up to be a brutal month for equities, with the S&P falling 8.9% month-to-date, the Dow down 7.1%, and the Nasdaq falling 11.7% since the start of the month. 

Wednesday’s session also sent the Dow into losing territory for the year, with the index down 0.6% in 2018. This is the fifth consecutive week of losses for the Dow, making this its longest string of weekly losses since July, 11 2008, when it fell for six straight weeks.

The S&P 500 also ended the trading day in the red, down 0.7% year-to-date."1

What drove the market? 

Historically September and October are volatile months.  With the midterm elections less than two weeks away, concerns about the Fed's position on interest rates, concerns over the slowing global economic expansion, the slowing in China (which many believe has been understated), concerns over Italy's budget proposal, Britain's efforts to exit the Eurozone, and fear about corporate earnings (and perhaps more importantly, earnings forecasts), investor sentiment weakened today. 

"Wall Street traders have been wading through this week’s deluge of quarterly corporate results, including several mega-cap names but have found few reasons to buy in an environment that promises higher interest rates and borrowing costs, as the Federal Reserve has indicated it will continue to tighten monetary policy by year’s end. On top of that, earnings growth shows signs of possibly stalling out due to tariff spats between the U.S. and China."1 Even though 90% of companies that have reported have met or surpassed their earnings, the market is forward looking and trade is an unsettled issue; both investors and markets dislike uncertainty.   

On the bright side, "the Fed’s Beige Book, a collection of anecdotes on the economy, showed that wages and prices are rising in the central bank’s 12 districts but not faster than a “modest to moderate” pace and that the economy expanded at a “modest to moderate” pace."1 The current economic data indicates the Fed should not be concerned about inflation. So the question is, “Why is the Fed continuing to tighten if there are no real signs of inflation?"  We believe the Fed is focused on tightening because the data indicates that in order for them to stimulate economic growth through monetary policy (i.e. cutting interest rates), they need to be able to cut the interested by 3% to 4%. The problem is that the Fed Funds rate is not yet at 3%." 

What are analysts saying?

"Alec Young, Managing Director of Global Markets Research, FTSE Russell laid blame for the day’s sell off on macroeconomic headwinds. “Chief among them is a Fed that seems determined to continue steady rate increases despite growing signs of weakening global growth as China struggles to stabilize its economy and markets all while US trade tariffs loom,” he wrote in a research note.1

“Meanwhile simmering US inflation makes it harder for the Fed to pause, making it more likely interest rates will continue to move up, potentially slowing growth next year. Lastly, Italy and the US elections both remain notable wild cards,” that are adding to investor unease, he argued."1

“We’ve had this massive shift in sentiment in recent months from ‘the market can do no wrong,’ to ‘the market can do no right,” said Amanda Agati, co-chief investment strategist at PNC Financial Services Group. She pointed to Tuesday’s steep selloff of Caterpillar CAT, -5.58%  stock as evidence that investors are more eager to sell on bad news than to buy on good news."

“It’s definitely becoming a stock picker’s market,” she said.“Companies that beat expectations and raise guidance get rewarded. Companies that miss or even report in line with expectations get pummeled.”

The triple overhang of trade uncertainty, Fed rate increases, and slowing global growth are “causing investors to jump on any bad news, or even just mediocre news, to punish stocks,” Lance James, senior portfolio manager at RBC Global Asset Management, told MarketWatch.1 

What do we think?

Our thoughts are that a day like today indicates the equity markets may be very close to being oversold.  The heavy technical selling in the final few hours today may have shown some capitulation from investors in index (passive invested funds) and less sophisticated investors.  Most analysts, if asked about their fear of a recession, would tell you they believe we should be o.k. for the next 18 to 24 months.  As we progress through earnings season, and continue to see positive economic data reported, we believe the market will again focus on fundamentals; in our view the current data does not warrant the selloff we have seen in the equity markets this week.

At times like these, it is very important not to fall prey to emotions, but  to stick to your long-term financial plan.  Please feel free to call or email us with any questions or concerns you may have or if you would like us to review your financial plan.

 


 

Brian Amidei, along with Partners Joseph Romano and Brett D'Orlando have also been named *2014, 2015, 2016, 2017, 2018 Five Star Wealth Managers!

Disclosures:
Awards and recognitions by unaffiliated rating services, companies, and/or publications should not be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if Fortem is engaged, or continues to be engaged, to provide investment advisory services; nor should they be construed as a current or past endorsement of Fortem or its representatives by any of its clients. Rankings published by magazines and others are generally based on information prepared and/or submitted by the recognized advisor. Awards may not be indicative of one client’s experience or of the Firm’s future performance. Neither Fortem nor the recognized advisor has paid a fee for inclusion on a list, nor purchased any additional material from the award provider. The criteria for each award is listed below:

Five Star Professional Disclosure:
The Five Star Wealth Manager award is based on 10 eligibility and evaluation criteria: 1) Credentialed as an investment advisory representative (IAR) or a registered investment advisor; 2) Actively employed as a credentialed professional in the financial services industry for a minimum of five years; 3) Favorable regulatory and complaint history review; 4) Fulfilled their firm review based on internal firm standards; 5) Accepting new clients; 6) One-year client retention rate; 7) Five-year client retention rate; 8) Non-institutionalized discretionary and/or non-discretionary client assets administered; 9) Number of client households served; and 10) Educational and professional designations. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or the magazine. The award methodology does not evaluate the quality of services provided. Additional information about this award is available at: fivestarprofessional.com/2016FiveStarWealthManagerMethodology.pdf
Fortem Financial 2016. All rights reserved.

Data Sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market Data: Based on reported data in WSJ Market Data Center (indexes); U.S. Treasury (Treasury Yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness.

Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. The opinions expressed are solely those of the author, and do not represent those of Fortem Financial, LLC or any of its affiliates. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful. Forward looking statements are based on current expectations and assumptions, the economy, and future conditions. As such, forward-looking statements are subject to inherent uncertainty, risks, and changes in circumstance that are difficult to predict. Actual results may differ materially from the anticipated outcomes. Carefully consider investment objectives, risk factors and charges and expenses before investing. Fortem Financial is a registered investment adviser with the SEC. Advisory services are offered through Fortem Financial.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighed index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.

Fortem Financial

PRIVACY NOTICE REGARDING CLIENT PRIVACY

Fortem Financial Group, LLC, has adopted this policy with recognition that protecting the privacy and security of the non-public personal information we obtain about our customers is an important responsibility.

All financial companies choose how they share your non-public personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your non-public personal information. Even when you are no longer our customer, we will only share your non-public personal information as described in this notice. So, please read this notice carefully to understand what we do.

The types of non-public personal information we collect and share depend on the product or service you have with us. This information can include items such as your Social Security number and income, your account balances and transaction history, and your investment experience and account transactions.

We collect your non-public personal information in a variety of ways. For example, we obtain your non-public personal information when you open an account or give us your income information, tell us about your portfolio or deposit money, or enter into an investment advisory contract. We also collect your non-public personal information from other companies. For example, from the custodians who hold your account assets.

All financial companies need to share customer’s non-public personal information to run their everyday business. Below, we describe the reasons we can share your non-public personal information and whether you can limit this sharing.

We share your non-public personal information for our everyday business purposes such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, report to credit bureaus, to protect the confidentiality or security of your records, or as permitted by law. We may also share your non-public personal information for our own firm’s marketing purposes; so that we can offer our products and services to you.

Federal law gives you the right to limit only sharing non-public personal information about your credit worthiness for our affiliates’ everyday business purposes; sharing non-public personal information about you with our affiliates to market to you; and sharing non-public personal information with non-affiliates to market to you.

We don’t share non-public personal information about your creditworthiness with our affiliates for their everyday business purposes. We don’t share your non-public personal information with our affiliates to market to you. We don’t share your non-public personal information with non-affiliates to market to you. We also don’t share your non-public personal information for joint marketing with other financial companies. State laws and individual companies may give you additional rights to limit sharing.

We share non-public personal information with our parent company affiliate, Focus Financial Partners, Inc, for its internal and external auditing purposes. We also share your non-public personal information with a non-affiliate for the purpose of aggregating it and providing summary information based on this data to our parent company, Focus Financial Partners, Inc.

To protect your non-public personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings.

Our policy about obtaining and disclosing non-public personal information may change from time to time. We will provide you notice of any material change to this policy before we implement the change.

If you have questions please call us at 760-206-8500 or go to our website at www.fortemfin.com.

IMPORTANT CONSUMER DISCLOSURE

Fortem Financial Group, LLC ("Fortem Financial" or the "Firm") is a federally registered investment adviser with offices in California. Fortem Financial and its representatives are in compliance with the current registration and notice filing requirements imposed upon federally registered investment advisers by those states in which Fortem Financial maintains clients. Fortem Financial may only transact business in those states in which it is notice filed, or qualifies for an exemption or exclusion from notice filing requirements.

This website is limited to the dissemination of general information regarding the Firm's investment advisory services offered to U.S. residents residing in states where providing such information is not prohibited by applicable law. Accordingly, the publication of Fortem Financial' website on the Internet should not be construed by any consumer and/or prospective client as a solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment, tax or legal advice. Furthermore, the information resulting from the use of any tools or other information on this website should not be construed, in any manner whatsoever, as the receipt of, or a substitute for, personalized individual advice from Fortem Financial. Any subsequent direct communication from Fortem Financial with a prospective client will be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. Fortem Financial does not make any representations as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to this website or incorporated herein, and takes no responsibility therefore. All such information is provided for convenience purposes only and all users thereof should be guided accordingly.

All statements and opinions included on this website are subject to change as economic and market conditions dictate, and do not necessarily represent the views of Fortem Financial or any of their respective affiliates. Past performance may not be indicative of future results and there can be no assurance that any views, outlooks, projections or forward-looking statements will come to pass. Investing involves risk, including the potential loss of principal, and the profitability of any particular investment strategy or product cannot be guaranteed.

Any rating referenced herein may not be representative of any one client's experience. Further, the Firm's receipt of any rating is not indicative of the Firm's future performance. The Charles E. Merrill Circle of Excellence award is granted by Merrill Lynch for outstanding client service and satisfaction. The award is granted based on annual criteria established by Merrill Lynch for its top decile advisors. The Barron's Top 1,200 Financial Advisors rating of the top financial advisors in the United States is based on data provided by participating firms. The following factors are included in the rankings: assets under management, revenue produced for the firm, regulatory record, quality of practice and philanthropic work. Investment performance is not an explicit component. The Five Star Professional award is granted by Five Star Professional and recognizes service professionals who provide quality services to their clients based on data provided by participating firms. The award is granted based on the following ten objective eligibility and evaluation criteria: credentialed as an investment advisory representative (IAR) or a registered investment advisor; actively employed as a credentialed professional in the financial services industry for a minimum of five years; favorable regulatory and complaint history review; fulfilled their firm review based on internal firm standards; accepting new clients; one-year client retention rate; five-year client retention rate; non-institutionalized discretionary and/or non-discretionary client assets administered; number of client households served; and educational and professional designations. Feedback from consumer surveys will augment a regulatory history review. Firms have the option to provide input on award candidates from their firm, regardless of the nomination source. The Palm Springs Life's "40 Under 40" Rising Young Professionals to Watch in the Coachella Valley is based upon nominations from the local business community and selected by the staff of Palm Springs Life.

For information pertaining to the registration status of Fortem Financial, please refer to the Investment Adviser Public Disclosure website, operated by the U.S. Securities and Exchange Commission, at www.adviserinfo.sec.gov., which contains the most recent versions of the Firm's Form ADV disclosure documents.

ACCESS TO THIS WEBSITE IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND WITHOUT ANY WARRANTIES, EXPRESSED OR IMPLIED, REGARDING THE ACCURACY, COMPLETENESS, TIMELINESS, OR RESULTS OBTAINED FROM ANY INFORMATION POSTED ON THIS WEBSITE OR ANY THIRD PARTY WEBSITE REFERENCED HEREIN.