Terry Sawchuk
Founder & Chairman
The Markets
Ahhhh….summertime…the familiar smell of burgers on the grill…the sound of bullets flying overheard…wait, what?! Apparently not everyone is in a hospitable mood this summer. Between communist turned capitalist turned communist Russian Presidents and tunnel digging terrorists plotting evil deeds, the summer of 2014 seems to be getting a little out of hand! What ever happened to “make love, not war!”. Perhaps the rest of the world should adopt our fellow Coloradoans approach to life and legalize marijuana? It might help settle some of these people down! All kidding aside, this is a great opportunity to talk about the separation of “headline news” versus actionable investment data.
There really isn’t much debate as to the general tone of the news these days. Lots of doom and gloom. Certainly, the potential is there for any one of a number of hotspots to escalate and cause more short-term damage to the investment markets, but I’d also like to point out that often times these headlines fade pretty quickly, and even if they don’t, exogenous geopolitical events tend not to do too much structural economic damage. A quick look at history shows the market typically recovers from whatever losses it may incur due to geopolitical events almost as quickly as it lost from them in the first place. The real challenge is having the foresight to be able to differentiate between what is really just a short-term nuisance versus what has the potential to be a longer-lasting downturn that causes real structural damage.
I’d like to take this opportunity to reinforce that you are in good hands, and assure you that we are paying very close attention to world events and their potential impact on your investments. To that end, we are very confident in the systems we use, and that if a more significant and prolonged market downturn were to emerge in the near future, we have the tools and technology that has been effective in the past at alerting investors to oncoming danger very early in the cycle. Of course, no two situations are ever the same when it comes to history and the market, and while past performance is no guarantee, it is the a tool available to help investors patterns of success or failure.
As for our crystal ball we would say it’s a little foggy right now, but at least for now, we feel like the downside may be somewhat limited here, and we would not be surprised to see the market resume its upward trend in the not too distant future. The algorithm is not flashing any warning signs at this point, and is generally suggesting that we stay in the market for now. There is one specific change we intend to make. We have removed European equities from our portfolios for now. Given the current geo-political environment, particularly in Ukraine and Israel, it’s natural to be concerned here, and even cautious, but at the same time, level-headed and as unemotional as possible. Our system is designed to keep us invested, and particularly when it’s a little uncomfortable because that’s when many investors get panicky and sell too soon. Our software is particularly designed to avoid this trap. Overall we believe the market may experience some more short-term volatility but despite the current headline news it appears to still be technically sound. As for Europe, while the fundamental reasons for adding it to our models are still present, in this case, due to geopolitical events, we believe that other opportunities may offer less volatility and better potential for the next couple of months. Specifically, we have added emerging markets in place of European equities. The emerging markets have held up better in recent volatility, and should benefit from stimulus packages from both Europe and China.
Rest assured we are armed with great tools to help us navigate this complicated global environment.
Best regards,
Terry Sawchuk
Visit www.sawchukwealth.com to review past issues of The Marketview.
Securities offered through First Allied Securities, Inc., A Registered Broker/Dealer, Member FINRA/SIPC. Advisory services offered through First Allied Advisory Services, Inc. A Registered Investment Adviser.
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