Being Boring

David B. Armstrong, CFA Weekly Market Commentary

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Global markets surged higher this week, boosted by falling (read: diving) interest rates as bad economic data led most pundits to predict multiple Fed cuts this year. Everyone has heard the saying, “Bad news is good news,” but that’s usually not the case if the news is actually really bad.

So is it?

Well, it’s true that the global economy is a little sickly-looking…BUT, if the Fed is going to support growth with lower policy rates absent a really major slowdown (and that’s still an “if” no matter what the probabilities project), doesn’t the recent stronger equity performance make sense?

My answer is yes.

But are we going to have a really major slowdown? That’s the variable, because recent equity performance has been a function of those two things – expectation of the Fed lowering rates AND no major slowdown.

What I wrote in my May 29th blog post remains my current thought:

“For now, I still see MONCON 5.  I see nothing in the model suggesting that we are in a recession nor do I see data that suggest we are within six months of a recession.  It’s true that headwinds have picked up, but a slowing economy is nowhere near the same thing as a negative economy (recession).”

I’m just struggling to find any overwhelming evidence of a recession in the short term, despite the yield curve starting to show some inversions. REMEMBER, lead times to a recession from yield curve inversions are very long and widely dispersed, making them less useful for market timing purposes.  This is why we use our MONCON gauge, and as of now, it’s still at MONCON 5.

MONCON_Recession_5

In fact, as a human, I’m impacted by the daily news cycle highlighting the problems of the day.  On the surface, they are all singularly important and meaningful in isolation.  The question is whether or not each news item is important or even predictive of what’s to come.

This is why I rely on the MONCON reading.

Things haven’t changed enough to move us to MONCON 4.  Sure, some inputs have changed, but nothing enough to move the needle.  And even when it does, a move to MONCON 4 is not going to prompt any defensive action in portfolios. That won’t happen until MONCON 3.

MONCON has not changed because it’s not watching TV and it’s not subject to emotions…In fact, it never even budged in the 4th quarter of 2018, as the market tanked around 20%.

Sound boring? Does the lack of action in MONCON get you wondering if it even works?  Does my steady drumbeat of the same old advice over and over again cause fatigue?

That’s the thing about boring, it gets really boring after 10 years.  Fight the urge to do something just to do something…whether it’s trying to do even BETTER than you have been, increasing your risk just to take action, or taking chips off the table because you come to the conclusion that the market has gone on too long and must be getting ready to crash soon.

Personally, I find it hard to get bored with the below.

SPX

Investing is not a contest or a game – your benchmark should be progress toward the success of your plan and reaching your goals.

No one talks about that on TV…you know why?

It’s too boring…

Keep looking forward,

Dave

Important Disclosure Information

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Monument Wealth Management), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.

All indexes referenced are unmanaged and cannot be invested into directly. The economic forecasts set forth may not develop as predicted. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Monument Wealth Management. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Monument Wealth Management is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice.

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About the Author
David B. Armstrong, CFA

David B. Armstrong, CFA

David B. Armstrong, CFA, is a President and Co-Founder of Monument Wealth Management. Along with his role as the firm’s chief investment strategist and portfolio manager, Armstrong is viewed as an industry leader in several areas including innovative practice management, discretionary asset management, digital marketing and social media. Dave is the writer of Monument Wealth Management's weekly "Off the Wall" Financial Blog and Market Commentary, and is frequently sought after by journalists and event coordinators. Visit his full biography here.

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