Well, our quiet summer lull has been awoken with a sudden jolt due to soft economic data last Friday followed by a Monday morning unwind of stock positions related to something market participants call the 'carry trade' (see definition here)
Normally, the carry trade would not make headline news, but the combination of a rapid rise in the value of the Japanese Yen to the US Dollar has triggered many institutions to unwind their bets causing a great deal of selling pressure to occur all at once.
One thing to note, is that most market pundits would agree that the economic reports last week alone would not normally have been enough to trigger this kind of market reaction, but during a light trading month like August, even normal amounts of trade volume can cause outsized market movement.
Furthermore, we believe that so far the Fed seems to be doing a reasonably good job of trying to usher in the ever-difficult 'soft landing' scenario (whereby they seek to reduce inflation by raising interest rates without completely snuffing out economic activity in the process). There is some renewed debate about whether or not the Fed should be accelerating their rate cut campaign (or perhaps even executing an emergency cut), so it will be interesting to see if this mose recent volatility factors into their thinking about the speed and pace of their planned rate cuts in the months ahead.
All this to say, there are a variety of factors leading up to this volatility, and our general advice for our clients is to maintain your original plan.
That being said, we are always keeping our eye on the markets and the portfolio to stay consistent with the phase of the economic cycle we are in. Our position is that a rate reduction campaign has been viewed as accommodative to both stocks and bonds and typically lasts for many months (and possibly years, notwithstanding the bumps and bruises of normal market fluctuations that are generally expected along the way).
Beyond that, should you happen to feel uncomfortable with your current allocation and desire to schedule a meeting to re-assess your own personal tolerance for risk in the portfolio, we are always open to that (and would even encourage you to do so if it has been longer than a year or two since completing your last Risk Assessment Questionnaire). Please visit our website to learn more about our risk scoring methodology that is employed to help ensure that your risk level is aligned with your goals by visiting our website HERE.
If you'd like to book a meeting with us, we always look forward to spending time with you, and this week is no different. Please visit our booking page HERE
Beyond that, we'll remain vigilant in the face of this uncertainty and stay hopeful that the Fed and the US Economy can re-gain its footing as we navigate these uncertain times. That being said, it wouldn't surprise us to see some additional gyrations in the near term, so please call if you have questions or concerns.
Sincerely,
Bryan Foronjy, CFP®
Founder and Principal Wealth Manager
Foronjy Financial
CA Insurance Lic. # 0F84170
Schedule an office (or phone) appointment here:
https://www.foronjyfinancial.com/schedule-an-appointment-online
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San Luis Obispo, CA 93401
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Santa Barbara, CA 93101
Bryan Foronjy is a registered representative with, and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Mariner Independent Advisor Network, a registered investment advisor. Mariner Independent Advisor Network and Foronjy Financial are separate entities from LPL Financial.
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Written by Bryan Foronjy Art tracking number TRACKING ID : 612474