At the time of this writing the broad markets are down over 2% (source WSJ.com). The recognition by the Federal Reserve that the recovery is weakening has further confirmed our outlook. In fact, it is likely that none of our readers were surprised by the Fed’s comments and actions yesterday.
The declines in the stock markets today are broad. At the present time only 3 of the 500 stocks in the S&P 500 are trading in positive territory. If the various stock markets close at their present levels, the S&P 500, NASDAQ and Dow Jones Industrial Average will all enter negative territory year-to-date. (source WSJ.com, Yahoo Finance, Bloomberg)(see index disclaimer)
Further market pressures came from overseas economies and worries about possible slowing growth in China. Investors perhaps are starting to ask, if the U.S. and European economies are weak and consumers are not buying, where will China export their goods? If China is not exporting as many goods overseas, it will be very challenging for them to continue their pace of growth.
Nervous investors are moving to sell assets they perceive as more risky, such as stocks and commodities and are moving into perceived areas of safety such as Treasuries and the U.S. Dollar. (this is not a recommendation to purchase any security)
Readers of this column are aware that over the past three months Lowe Wealth Advisors has been moving our actively managed discretionary portfolios and discretionary indexed accounts, toward a more potentially defensive posture. Proactive shifts in some allocations over the last two weeks increased bond exposure prior to the Fed’s announcement yesterday. Our foreign exposure has been reduced and our domestic equity exposure is underweight in most actively managed allocations. In short, we believed that the weakening signals justified a move to a more conservative stance and we have been making these shifts in our discretionary accounts since May. You are not going to see any significant shifts in our allocations as a result of what the Fed announced yesterday because we were prepared for it.
However, it is important to remember that we believe that it is important to retain some level of equity exposure in our allocations. The stock market has been unpredictable and extremely volatile. The prudent approach in our opinion remains one of a well diversified portfolio and being underweight in the areas where we believe the highest levels of risk are. We also believe a focus on certain bonds and equities that have the potential to pay regular dividends may become important components over the near term.
Lowe Wealth Advisors continues to monitor the situation and will keep you informed of our thoughts and any potential strategic shifts we believe might be necessary. We will also be hosting another conference call with Morris Segall in the near future as the response from the last call was very favorable. It is still available on our website and still relevant based on the current environment.
What should you be doing during these challenging times? Be sure to let us know if your financial situation might be changing. The sooner you let us know of any changes, the greater the level of insight we can provide. We’ll have an improved ability to adjust your portfolio ahead of the possible change. We are always happy to provide insight about the impact any possible purchase, withdrawal or change might have on your situation.
In conclusion, we recognize these can be unsettling times and appreciate the trust and confidence you continue to place in Lowe Wealth Advisors.
If you have not read the Quarterly Newsletter from economist Anirban Basu which was included in your quarterly report package, you can read it by clicking here.
July 6 Lowe Wealth Advisors conference call with Morris Segall
If you missed the conference call with Morris Segall and Lowe Wealth Advisors July 6th click here to listen. The call is about 35 minutes in length and discusses the economic conditions, capital markets and Lowe Wealth Advisors strategies. Note: The call is intended to be informational in nature and should not be considered advice or a recommendation for any particular strategy. Past performance is no guarantee of future results.
Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary therefore, the information should be relied upon when coordinated with individual professional advice. Not all portfolios are actively managed. If you have a question about how your account is being managed please contact us. Generally accounts less than $150,000 are not actively managed. An Index is a portfolio of specific securities (common examples are S&P, DJIA, NASDAQ), the performance of which is often used as a benchmark in judging the relative performance of certain asset classes. Indexes are unmanaged portfolios and investors cannot invest directly in an index. Past performance is not indicative of future results.
- Not all portfolios are actively managed. If you have a question about how your account is being managed please contact us.
- No diversification can completely protect against market risk or other risk factors with investing. A diversified portfolio could still lose money.
- An Index is a portfolio of specific securities (common examples are S&P, DJIA, NASDAQ), the performance of which is often used as a benchmark in judging the relative performance of certain asset classes. Indexes are unmanaged portfolios and investors cannot invest directly in an index. Past performance is not indicative of future results.
Foreign investing carries additional risk such as currency risk, political risk and different accounting standards.
*Lowe Wealth Advisors is a registered investment advisor.