WOW…What a difference a day makes. Tuesday was just another day in La La Land. Everyone talking about the latest tweet, the French election, would the Fed raise rates or not and why was volatility so low. Then, late Tuesday, news broke that there was a memo that James Comey wrote regarding a meeting with President Trump.
Wednesday morning as the markets opened, this seemed to be the focus and as the day went on, things only got worse. Volatility is back!
The question is, did the memo cause the markets to go into free fall, the DOW losing 372 points or was something else the culprit. For the conspiracy theorist and other prognosticators, it just doesn’t matter. What caused the market correction is less important than the fact that we identify changes and take appropriate action. We cannot become complacent.
Overall, our accounts were little affected by yesterdays action. We are holding mostly Preferred and Corporate Bond funds along with a small position in XLK (Technology ETF).
The green line above is the S&P500 showing a 1.82% drop yesterday. The red line is XLK (Technology ETF) with a 2.73% drop. The Blue line is PPSIX (Principal Preferred Securities) which was flat on the day.
It is quite easy to see the very steady, low volatility growth in the Blue line has enjoyed over the last 5 months. We all like the high returns offered by sectors such as technology, but you have to accept the high volatility that goes with that type of investment. This is why we only hold small positions in these sort of sectors, if at all.
One thing that is very interesting is that the S&P500 (Green line) has really been moving sideways since early February. This may turn out to be a top in the recent bull market or it may simply be an overdue correction. Either way, it is only important to recognize we must watch the markets daily and be ready to take appropriate action when changes occur, both up and down.
As always, we will continue to monitor the markets, tweets and real news. When things change, we will take action to protect your investments.
For those I have not talked to lately, I recently took a fall while out cycling and broke my collarbone. It is on the mend and I hope to be back out riding soon. Regardless, I am watching the markets and working everyday. I am also working on other changes that I think will grow and benefit Coastal Wealth and all of my clients.
Thank you for your trust and business. If you have questions, please feel free to call.
Kirk Zickler
