Bouchey Financial Group Friday Morning Outlook
Written by: Ryan Bouchey
I was scrolling through my Twitter feed yesterday afternoon (stock price notwithstanding, if you follow the right people it can be an excellent source of news and information), and I came across one of the best tweets to put this week into perspective. It was from Matthew Rose who is a deputy chief at the Wall Street Journal and it read “I am a long term investor. I am a long term investor. I am a long term investor. I am a long term investor. I am a long term investor.” Truer words have never been said.
As we begin our Friday it’s important after a week like this to keep things in perspective. The news out of China hasn’t been great, but it hasn’t been great for 2-3 years now. It’s no surprise that their economy is slowing down and the move to devalue their currency to help spur growth shouldn’t be cause for a major U.S. equity sell-off. In fact China has previously stated their goals of currency devaluation so this recent move was expected. Also we should remember exports to China make up LESS than one percent of overall U.S. GDP.
A drop in oil price like the one we’re currently experiencing historically could be a cause for concern. However, the current drop in oil price is solely rooted in supply, NOT demand. The combination of U.S. oil production and OPEC standing as is and not reducing their production has led to huge inventories, thereby causing prices to plummet. Demand for oil in 2015 grew at its fastest pace in five years, unfortunately production is out-pacing consumption at the moment, but no fault to consumers. Keep this in mind when the pundits tell you that the oil sell-off is cause for concern for equities.
Away from the headlines, there’s still a lot of good, fundamental data to help support an optimistic outlook going forward into 2016. Consumer spending is strengthening, helped by low gas prices and increased wages. The job market continues to strengthen, helped by this morning’s huge job number of 295,000 vs an estimate of 200,000. Due to the current sell-off, U.S. equities are back to their historical average from a valuation perspective. U.S. car sales hit a record for 2015 and housing continues to strengthen the overall economy. The Fed raised interest rates because they felt our economy could handle it and based on this morning’s job report they look like they got it right. Europe continues its manufacturing strength and growing economy. The list goes on and on, but unfortunately you won’t hear many of these positives on the negatively-biased news cycle.
After the week we’re having, it can be difficult staying optimistic and not worrying about your investments. We continue to invest for the long-term, and all the moves we made at the end of 2015 in your portfolio were with the long-term in mind. We are experiencing volatility now but nothing from a fundamental perspective changes our outlook from a week or even a month ago. As always should you have any questions we are here and please call us to discuss your portfolio. We will be on the radio this weekend (Saturday at noon on 810 and 1031 WGY) to talk about our thoughts and don’t forget to RSVP to our State of the Economy presentations we are holding February 10th and 11th. You should have received an email invite earlier this week and a formal invite will be out in the mail shortly.
Take care and have a great weekend.
Ryan