A Day Late & A Dollar Short
About the author: Trini Guillen is dedicated to helping clients achieve financial freedom. Trini has passed the Series 65 examination and has a Bachelor of Science in business administration with a focus in finance. He has spent 21 years in the financial industry. His previous experience includes trade system research and development, portfolio management, due diligence and trade execution.
A DAY LATE & A DOLLAR SHORT
I don’t know about you, but this cliché was pounded into my head when I was younger. My grandpa used to say that people that found themselves in that position were always looking behind them and NOT looking at what was coming down the road ahead of them.
Many within the financial industry will tell you that they don’t have a crystal ball and have no idea what the market will do tomorrow. While they’re right and no one should tell you differently, there may be times if you listen and watch very closely, that the market might be telling you what to look for in the coming years.
For example, the markets rallied strong in 2017 largely pricing in presumed tax cuts that would lift forward earnings to record levels. In the summer of 2018, forward earnings reports were at all-time high levels.
Bottom line is that stocks became expensive and looking forward should suggest that it may be time to take a little profit because no one has gone broke taking profits.
The 4th quarter of 2018 brought in downside volatility that saw indexes drop over 19% from their highs in a matter of 3 months . This is a steep decline and worth paying attention to and the Wall Street Journal came out with an article that cash was in a better position than most asset classes globally. However, this was a December article, which means we had already seen a 10% move down from the highs in the US market alone, so wouldn’t you have wanted this information say 6 months prior?
If you had taken some profits and had moved to a cash equivalent position you may have been in a different mindset when stocks were on sale at the end of 2018. Since then, we’ve seen a brighter 2019 thus far - but how long will that last? Looking ahead, I believe we will have the challenges of the Fed resuming a rising interest rate policy, US & Corporate Debt and China trade tariffs that could continue to be concerns to consider. For now, the market forges ahead and of course that is a very good thing, I am always a fan of rising market prices.
So, the question is, are you looking ahead and adjusting your risk to take advantage of the next opportunity? Or will you find yourself in a position with no cash when stocks go on sale again and finding yourself “A DAY LATE & A DOLLAR SHORT”.
If you have an advisor, then that person should be the one providing these thoughts to you. If you’re self-managing, then you would be the one adjusting your mix. Just keep in mind, much of the time you may find yourself doing nothing at all!