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The Truman Show is a 1998 science fiction film featuring Jim Carrey as Truman Burbank. Truman, the unsuspecting star of The Truman Show, a reality television program broadcast live around the clock worldwide, spends his entire life in the fictional seaside town of Seahaven Island. This giant set equipped with state-of-the-art technology can simulate day/night, weather conditions, and has thousands of cameras to watch him. During his college years, Truman was supposed to fall in love with and marry co-student and actress Meryl. Instead, he fell for Sylvia, an “extra.” Sylvia warns Truman his “reality” is fake. Outside of the show, Sylvia has become part of a “Free Truman” campaign that demands the end of the show and Truman’s freedom. Sylvia helps Truman realize he is a pawn within a greedy corporation and wears a red sweater with a pin that says, “How’s it going to end?”
The question on Sylvia’s button may be the same question on your mind when it comes to the market. How is it going to end? When is it going to end?
First, let’s define a bull market. A bull market is a market pattern that occurs when prices keep rising up 20% from a previous drop of 20%. A bull market can refer to the securities market (like stocks and bonds), but can also refer to other markets like housing.
The U.S. economic expansion entered a record 11th year, while the bull market in equities is a few months older. You may be asking yourself the same question Sylvia’s button asked. The three Ts– Trump, Tariffs and Trade wars, can be a wet blanket on the embers of growth, but the market can still go higher. The adage, “Bull markets don’t die of old age” may be true, but attempting to time when to get in and out of markets can be futile and dangerous to reaching your long-term financial goals. Always keep in mind that the bottom of a bear market is the start of the next bull market, and also remind yourself of your personal time horizon. The truth is nobody knows how the current bull market is going to end.
There is no expiration date for bull markets. Nobody has a crystal ball to say when the bear market will begin and how long it may last, which is why we believe it is prudent to maintain a diversified approach and focus on the things you can control and not let fear or greed dictate your next move in your portfolio.
Warren Buffett famously said that like dieting, successful investing is far easier to understand than to accomplish—because it requires discipline. At Intelligent Investing, we monitor and rebalance portfolios with the goal of maintaining the amount of risk we jointly agreed to take. We have a strong philosophy and set of processes that strive to reduce the emotional component of managing wealth.
Remember your history. Big equity drawdowns happen time and again and tend to drag down typical investor portfolios with them. The S&P 500 drawdowns worse than 20% have happened 11 times since 1926. We will have a bear market, but studies have shown that attempting to tactically avoid the next equity selloff is likely to disappoint investors. Diversification and discipline are still investors’ best bet.
We are long-term wealth managers. We try not to get caught up in the loud noise of the markets and we encourage you to do the same. If you’d like a financial accountability partner who can help minimize financial stress to maximize your life, let us know.
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On today’s Intelligent Money Minute, we’ll interview Dan Hamilton on real estate lessons learned from the crisis of 2008. During this episode, we discuss the value of diversification, and how this strategy kept Dan’s business alive. Our previous podcasts with Dan highlighted Real Estate Tips For Successful Professionals and Reasons for Entering The Real Estate Profession.
If you are interested in learning more about diversification and how this can minimize risk, you can read about Intelligent Investing’s “Wealth Management Philosophy” here.
We’ll be interviewing Dan on several podcasts regarding the Greenville market and on real estate in general, so be sure to subscribe to our Intelligent Money Minute podcasts.
Dan is a founding partner and the Operating Principal of Keller Williams Realty Greenville-Upstate, one of the largest and fastest-growing real estate brokerages in the Upstate. He is also the founder and Team Leader of Hamilton and Co. of Keller Williams Realty.
A longtime member of the Greenville community, Dan is passionate about serving and improving our community, and, to that end, he currently serves, or has served, in the following capacities:
On November 4, 2008, Dan was elected to serve his community in the South Carolina House of Representatives. He was elected Vice-Chairman of the Freshman Caucus and Chairman of the Upstate Caucus. He also serves on the Judiciary Committee.
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In this latest podcast, we interview Dr. Jeff Roach, our director of research, on 4 Reasons Not to Worry About a Trade War. But first, a little backstory:
On Wednesday and Thursday this week, the Dow dropped nearly 1,380 points. While 1,300 points sounds like a lot, the Dow Jones Industrial Average began Wednesday at more than 26,400. So the decline ultimately represented a loss of just over 5%. In other words, the U.S. stock market is back where it was in roughly mid-July. Keep in mind, the Dow Jones Industrial Average (DJIA), or simply the Dow, shows how 30 large, publicly owned companies based in the United States have traded during a standard trading session in the stock market. It only represents 30 large companies and is a relatively small sample of companies compared to the broad U.S. market and an even smaller sample when comparing to the global markets.
A stock moves up or down in price because of investor sentiment. If investors believe a stock is worth more than its current price, it moves up. If they believe it’s worth less, it moves down. Stock markets are immediately responsive to what investors believe. These beliefs generally are formed more in response to investor emotion – how they feel about the stock price – than directly from an analysis of the stock’s metrics –such as improved or declining earnings, the price-to-earnings ratio or earnings per share.
As often occurs after a big market move, traders, news media, and taxi cab drivers offer up several explanations for what happened to the stock market. Here are two possibilities:
One has to do with President Trump’s trade war with China. While the Trump administration has been talking about China for months, it upped the ante in late September by slapping a 10% duty on $200 billion worth of Chinese consumer goods. The China tariffs are expected to jump to 25% in January. The trade stand-off could hurt both the U.S. and Chinese companies, by raising production costs and crimping consumer spending, which could affect GDP.
Also in late September, the U.S. Federal Reserve raised interest rates for the third time this year. Those moves are meant to reduce the risk of inflation, which has been finally beginning to tick up as the U.S. economy gains steam. Higher interest rates hurt stocks by making bonds a comparatively more attractive investment, and by making it more expensive for companies to borrow and invest.
First, make sure your portfolio is prepared to weather the next storm. Second, ensure it is aligned with your risk tolerance and goals, and third, have a sound investment philosophy. We would be honored to serve you and your family and may provide a complementary portfolio review if you are concerned.
Intelligent Investing is able to stress-test your existing portfolio to determine what raising rates may do to your portfolio. We’d be happy to let you know what hidden risks may be lurking in your portfolios, and whether you are in an appropriate portfolio based on your risk tolerance. See the article below for what rising rates could mean for your money.
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