Equity markets are once again exhibiting heightened volatility as weakening economic data and exuberant stock valuations intermingle. The jobs report Friday will be quite important, but regardless the Federal Reserve is almost certain to being cutting rates. How far they do will be determined by future economic data.
While lower rates will be beneficial for areas such as mortgage rates, if the cause for rate declines is rapidly increasing unemployment, then the net impact would likely be quite negative as it was in 2008. Conversely, if the economy picks up steam, bolstered by lower rates, inflation could also potentially become a major problem again. Trying to definitively predict which outcome occurs is most likely futile, but we want to be able to invest successfully, regardless of how it plays out. Often this means balancing value stocks, high-yield bonds, REITs, and our dynamic income-generating options strategies. For instance, building a bond ladder and incorporating adjustable-rate loans allows us to take advantage of locking-in some duration and reducing reinvestment risk, without exposing too much in the case that we do get heightened inflation in a few years. The big thing is now is a truly terrible time to be 100% invested in stocks. The inflation-adjusted CAPE P/E ratio is around 36, which is in the top 96th percentile in history. Valuations are extreme, particularly in large cap Tech where the indices are so concentrated. Unless you are perfectly fine riding out a 40-50% decline, I do not recommend that strategy.
I had the opportunity to a wonderful podcast with Value Stock Geek a few weeks back and I want to encourage you to listen to it, as he asked fantastic questions, and we really got to cover a lot of the reasons why we employ the strategies that we do. Here is the link.
Here is a link to our recent research report on WPC: https://acrobat.adobe.com/id/urn:aaid:sc:US:52de8ff8-24c9-421b-a4df-38584356a2ec
Here is a link to our recent research report on AGO: https://acrobat.adobe.com/id/urn:aaid:sc:US:2b784c03-fd28-486c-bc19-66be1be912a9
Here is a link to all of our most recent radio shows where we have been covering a wide variety of financial planning topics each week: Radio Shows: https://ttcapitalonline.com/truth-about-money-radio-show/
If you enjoy our newsletter, please feel free to forward to friends, as that is how we grow.
Thank you very much and please let us know if you need anything at all!
Sincerely,
Tim Travis
CEO/CIO T&T Capital Management
805-886-8140
While lower rates will be beneficial for areas such as mortgage rates, if the cause for rate declines is rapidly increasing unemployment, then the net impact would likely be quite negative as it was in 2008. Conversely, if the economy picks up steam, bolstered by lower rates, inflation could also potentially become a major problem again. Trying to definitively predict which outcome occurs is most likely futile, but we want to be able to invest successfully, regardless of how it plays out. Often this means balancing value stocks, high-yield bonds, REITs, and our dynamic income-generating options strategies. For instance, building a bond ladder and incorporating adjustable-rate loans allows us to take advantage of locking-in some duration and reducing reinvestment risk, without exposing too much in the case that we do get heightened inflation in a few years. The big thing is now is a truly terrible time to be 100% invested in stocks. The inflation-adjusted CAPE P/E ratio is around 36, which is in the top 96th percentile in history. Valuations are extreme, particularly in large cap Tech where the indices are so concentrated. Unless you are perfectly fine riding out a 40-50% decline, I do not recommend that strategy.
I had the opportunity to a wonderful podcast with Value Stock Geek a few weeks back and I want to encourage you to listen to it, as he asked fantastic questions, and we really got to cover a lot of the reasons why we employ the strategies that we do. Here is the link.
Here is a link to our recent research report on WPC: https://acrobat.adobe.com/id/urn:aaid:sc:US:52de8ff8-24c9-421b-a4df-38584356a2ec
Here is a link to our recent research report on AGO: https://acrobat.adobe.com/id/urn:aaid:sc:US:2b784c03-fd28-486c-bc19-66be1be912a9
Here is a link to all of our most recent radio shows where we have been covering a wide variety of financial planning topics each week: Radio Shows: https://ttcapitalonline.com/truth-about-money-radio-show/
If you enjoy our newsletter, please feel free to forward to friends, as that is how we grow.
Thank you very much and please let us know if you need anything at all!
Sincerely,
Tim Travis
CEO/CIO T&T Capital Management
805-886-8140
