If there is not another stimulus bill what do we do?
At the time of recording, President Trump had insinuated there would not be a stimulus bill he would sign. At the time you are reading this he has retreated from that statement and now the normal negotiations have begun. In our opinion the stock market is pricing in another stimulus bill and as we have talked about before if the market doesn’t get what it expects it reacts with volatility. In this case, we would expect growth in the US dollar and the major indexes to begin a correction. However, if a stimulus bill gets passed, we don’t necessarily expect the inverse. We believe that we may get a case of “buy the rumor, sell the news” and the stock market selloff anyway. In our opinion, the real catalyst is the US Dollar. If this strengthens, we think we’ll see a selloff in stocks. Either way, we believe it is still a time for caution because of the potential for a contested election, a second wave of the global pandemic, and an economic recovery that is weakening IF it has truly reached the “recovery” phase at all.
What has Sound Financial done differently due to the events of 2020?
Many things have changed in the United States this year from the way we interact with family to the way businesses operate. The stock market was not immune to the chaos of 2020 and moved at record speeds. We at Sound have done two things.
First, we have prayed and embraced Proverbs 3:5 Trust in the Lord with all your heart; do not depend on your own understanding. Wow, this is an understatement, a favorite verse for this year has been Jeremiah 17: 7-8! (please go look this one up!)
Second, we have rebuilt models that stick firmly to our rules-based approach and allow for more movement into asset classes that in our opinion will perform well with the ongoing economic cycle and monetary policy in place. We combine that with watching the entirety of the New York Stock exchange so we can identify an oversold condition that would trigger a rotation in these dynamic models. From a fundamental standpoint, we are seeing in the market what we expected to see which was a slowing economy and an asset bubble in certain US stocks. The unknown accelerant was the Global pandemic, which threw the details “out of whack” for a period but we are seeing a return to a slowing economy and still an asset bubble. Therefore, our models are built with these expectations, using our rules-based methods, and waiting for good buying conditions.
While the outlook sounds poor in some cases, we would be excited to see a “roll-over” in investment conditions as we believe this would give you, our clients, the best future opportunities.