How Was Your Flag Day?

How Was Your Flag Day?

Waving a flag… on Flag Day

June 14th – Flag Day, a little recognized, largely overlooked holiday falling in the No Man’s Land of the summer months midway between Memorial Day and the 4th of July.  While it commemorates the adoption of our nation’s flag in 1777, no one gets that day off, no parades fill the streets, and Hallmark doesn’t even sell cards for the day… and Hallmark cranks out cards for every day and occasion!  In short, Flag Day passes by each year almost entirely without notice.

Flag Day for the Financial Markets:  likewise, the markets these lazy June days seem to be giving little attention to developments that may lead to shifts in direction – perhaps there needs to be a few flags waved right about now and vigorously!

Indeed, investors have enjoyed quite a run of warm, sun-drenched financial weather of late:

  • Markets at Highs – 37 new all-time highs for the Dow this year right through June 9th and the all-time longest stretch without even a minor 5% pullback.1
  • 2nd Longest Bull Market since 1950 – 99 months long as of June 9th.2
  • Advancing corporate earnings – up 10%-12% for S&P500 stocks anticipated in the 2nd quarter.3
  • NASDAQ 100 Index has closed higher 70% of trading days as of June 9th – the previous record of just 60% was held by 1998, 1999 and 2007.4

What Could POSSIBLY Go Wrong?  Well…a few things actually:

  • 2017 Returns Concentrated in a Very Few Tech Stocks – What’s being called the “FAAMG”:
    Facebook, Amazon, Apple, Microsoft, Google (Alphabet) account for 41% of this year’s gains among the S&P’s 500 stocks; had together gained some $600 billion – before losing $97 billion on June 10th.5
  • Interest Rates are Rising – the very easy credit and low rates of the years since 2009 may have fueled stock prices with lots of dollars circulating.  The week of June 12th, the Fed increased rates for the 3rd time in the past 7 months.
  • The Trump Legislative Agenda is Bogged Down – health care reform and tax rate cuts are currently stalled in Congress; stock gains right after the election may have anticipated bills passing.

Barrons likened the current market to the “Nifty Fifty” market of the early 70’s or the dot.com era of 1999-2000 while Guggenheim Chief Investment Officer Scott Minerd put it this way: “stock and bond markets have rarely been more expensive and stable, and that has me worried.”6

What To Do Now?  99 months into a bull market and after an unusually consistent and persistent run of gains for both stocks and bonds, does this recent tech stock selloff signal a major change?  The only truly honest answer is that we don’t and can’t know since turning points in markets are determined by future events that cannot be predicted.

The very good news here is… we don’t have to predict the future!   We do, however, need to check in with the state of our overall wealth plan and our account balances as well as how they are balanced: Is our savings rate on track?  Do we have alignment – our long-term savings in long term positions and our short term savings/reserves in more conservative positions?  Have we made allowances in our plan for the next 30% falloff bear market?

So as Flag Day passes by yet again all but unnoticed and your 4th of July fun-in-the-sun plans take shape for the peak of summer holiday, pull out your calendar now and let us know when we can get back together to review things in July… oh, and do wave Old Glory… vigorously!

Past performance is no guarantee of future results.

1CNBC, June 10, 2017

2BTN Research, June 5, 2017

3Seeking Alpha, June 11, 2017

4"Not Feeling the Love", Kopin Tan, Barrons, June 12, 2017

5"Tech Stocks Get Slammed", Wall Street Journal, June 10-11, 2017

6"The Day Tech Tanked", Randall W. Forsyth, Barrons, June 12, 2017 

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