Monday, January 07, 2019

Volatility here to stay?

The U.S. equity market continues to gyrate or hesitate in fits and starts as if not knowing what to do.  There are many market analysts and pundits who speak of the market as if it were a person who thinks in some cohesive way, best understood by those suits speaking.  The truth seems to be that it is confounding to most.  Explaining a day, today at this moment only, when Google, Apple, and Facebook are down materially while Amazon, Nvidia, AMD, and Anet are decently up can be done, but not easily.  Also, various tech small caps bought here several weeks ago with seemingly precise bad timing are now erasing losses, even two of the five moving slightly to the plus side.  The dubious overall position in PYX is now moving into distinctly positive territory, albeit with a position that is now disturbingly large due to stubborn bottom fishing.  Even the almost preposterous JCP position began in November and doubled in December is now at par.  Should I get out, yes, will I, unlikely at the moment.

This volatility will continue until some base is established, if this is possible to find in these Trumpian times.  Earnings and risk drive stock market pricing, but completely random political chaos creates an environment that defies any confident speculation.  If one attributes the persistence of consumer spending partially to boomer wealth, that may slow as they do.  If analysts and commentators focus on low unemployment levels and the manufacturing index as positive indicators, that is close to folly.  Wages broadly are only rising modestly and manufacturing is far less important than the service industries.  The vaunted $15 minimum wage would yield an annual income of $31,200 dollars for a forty hour week, before Social Security taxes(that is what they are). That modest level exists almost nowhere, and across the United States my guessed at average of the minimum wage is $11.  Shortages of workers in some areas are only being met with modest wage increases, contradicting economic thought, because the problem is not only pay but qualifications to do the jobs.

Looking at annual performance here, not so swift but with the S&P down over 4.7% not horrible.  With a concentration of stocks buffered by bonds and money markets, the more aggressive account was down 7% and the other down 2%.  Accounts managed for family were both down 1%  So overall not so bad when considering that the often exceptional Fidelity Contrafund which was down 2% and the closely followed Dodge and Cox Stock fund down 7%. 

As this post was being written with breaks during the day, the market has continued to strengthen.  Money must be invested somewhere.  The outlook for the year is murky here, but nowhere to run to.  Still in with equity allocation toned down just slightly.



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