John Woolley will be at the Lillis Business Complex on Thursday, October 17th at 5:00pm speaking to the students of the Department of Finance and Securities Analysis aboutr fixed income securities and private debt capital.
View the latest charts and comments on the U.S., Oregon, and Washington economies from Dr. Conerly of Conerly Consulting.
We are pleased to re-post Dr. Conerly’s October charts for our clients. Please see his site for more data and comments: www.conerlyconsulting.com. Click the images below for larger versions.
The most discussed topic in financial markets currently is, as we all are aware, the government shutdown and the potential for a default on upcoming payments the government is obligated to make. The question has arisen from a few clients of what steps should be taken in light of these circumstances? Perhaps the most important response we can give you is that this is gut-check time for your asset allocation. Investors are in a situation of “unknowns.” (There are always “unknowns” in investing; they just seem more acute right now.) We happen to think, along with most strategists, investors, et al., that the actual probability of a default is pretty close to zero. It’s not zero, but it’s close. In the meantime, while Washington hopefully gets its act together, stocks have moved downward a bit. Recognize however, that the stock market is still up about 16% at this writing – well above an annual average.
For most clients, we currently have more cash, and hence are less invested, than we have been in a long time. This has been a conscious effort as lately we have found stocks to be expensive and interesting ideas few and far between. A stock market correction, usually defined as a 10% pullback, could conceivably change that dynamic and provide opportunities to put money to work. For those clients with government/agency bonds in their portfolios, we sleep pretty well – you’ll get your money back at maturity (or a bit later if a bond matured during a default).
If an investor’s anxiety is overwhelming given these events, it’s probably a sign that their risk tolerance is not as high as they think, and we should perhaps have a discussion about that. Dramatic tactical shifts are rarely the correct answer; long-term asset allocation and adhering to your financial plan is.