Macro Economic Update: Volume 1, Issue 4

Sector Update

  • We are still in Sector 3, which indicates slowing growth and rising inflation.
  • We are taking a defensive approach to investing at this time.
  • Why? From a year-to-year comparison, global economic numbers across the board are declining. We believe will see a continued decline and have reduced our risk to high BETA stocks and asset classes.

GLF_SectorGraphic-03


Market Trends: S&P 500 Update

  • One thing I have learned in my years of studying global markets is that the "trend is your friend." This S&P 500 continues to move higher. 
  • The Rate of Change (ROC) continues to stay above zero, which is positive.
  • Concerns: The VIX Index, the volatility index that measures the amount of volatility in the S&P 500, is staying below 15, which indicates there is little volatility. The S&P 500 has been moving higher as the VIX moves down. On the chart below, the VIX shows a turn higher on the ROC indicator. If this continues through the zero line, this could indicate an increase in volatility in the S&P 500.

S&P 500 Chart End of November


The VIX (Volatility Index)

VIX Chart


Bond Market

  • The 10-year U.S. Treasury continues to bounce between the 1.7% and 1.95% yield range.
  • A break below 1.7% could be an indicator of volatility ahead.
  • Reminder - when yields go up, bond values go down. When yields go down, bond values go up. 
  • The world still sees the U.S. Treasury as a safe place to be.

10 year treasury graph-1


The MOVE Index (Volatility Index for the 10-Year U.S. Treasury)

  • The three year average is 58.53. As of November 25, we are at 62.17 - just above the average.
  • Right now, the MOVE Index is not moving much. This can be an indicator as to where the 10-year U.S. Treasury is headed. I'm not overly concerned, but am keeping an eye on this.

MOVE Index-1


U.S. Dollar

  • The trend of the U.S. dollar is up.
  • The U.S. dollar has recently made a move higher, indicating an increased demand for U.S. currency. This could be a sign of concern - the stronger the U.S. dollar, the more increase in fear.

Dollar chart


What Does This All Mean?
We believe the U.S. is the best market to be in at the time being. By reducing your high-risk positions and allocating more towards value-oriented companies, you could help reduce risk and lessen the potential for extreme volatility.

The following are two things you should consider doing as we enter the new year:

  • Is your level of risk in line with your investments? Find out by using our free Risk Analysis calculatorClick here to get started.
  • Consider if consolidating your 401(k) and IRA could be beneficial. Reach out to me if you have questions or need help.

Have Questions?
If you have questions about any of the above content, please do not hesitate to email at tag@grinkmeyerleonard.com. Or click here to view my calendar and schedule an appointment that is convenient for you.

stock market, fed, federal reserve, economy, investing

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