Market Correction Phase 2?

April 03, 2018

 

Yesterday the broad markets dropped about 2%, but they were led by some interesting stories.

 

Hello. My name is Paul Carroll. I'm the CEO and founder of Efficient Wealth Management, a boutique wealth management firm.

 

Interesting stories, for sure, have been driving the market in an extremely volatile fashion. Amazon somehow got into a fight with President Trump. Somehow, Amazon's at fault for what's happening to the United States Post Office. Actually, most analysts would agree that Amazon, if anything, has saved the post office, and the reason they're losing money is because Congress has required ongoing cash funding of pension plans. How he got into this spat, we don't know, but it's killing Amazon stock.

 

Tesla, maybe, finally on the brink of bankruptcy. Certainly, if they can't raise significant cash in the near future, they're in a lot of trouble. They have had an extremely good safety record with their vehicles, but apparently, if a self-driving car has one accident in a million miles, that's one too many, so they are dealing with that reality in the real politic.


Facebook — we don't need to know too much about Facebook to know that they're in everybody's doghouse. They clearly don't care. They know they don't care, and they're being forced to change their behavior slowly but surely.
Google's in a lot of trouble too. They're not in trouble, per se, as they're part of the collective, and Google is a huge monopoly. So many of the rules — the privacy rules, and some of the other things that are becoming increasingly inevitable, are certainly attacking Google's stock price.


Finally, China has finally retaliated on the food market, so the entire United States' Midwest farmers are about to find out what it's like to be on the wrong end of tariffs. Certainly, a lot of this action that has caused this market movement is taking the pressure off U.S. financial markets. How far are we? Are we halfway through the correction? It's impossible to know. This is not a financial crisis. This is more of a vanilla market correction/potential recession. I would not be at all surprised if we had a recession starting later this year. Will the tariffs trigger them? I don't know. It could be, it's just time. It's been a long time since the last real recession.

 

Right now though, the inflation numbers are quite good. There's inflation in wages, but that means that everybody who wants a job has got one. Finally, we're actually seeing people coming out from the recesses of the permanently unemployed and getting jobs for the first time in 10 years. So there's a lot of good news embedded in the bad news, for want of a better term, and none of the good news really makes it into the press. It makes it impossible to predict what's going to happen next, but what can we do? We rebalance. We sell high and buy low, and funny enough, that's always worked in the past, and as these markets do make their corrections, we're very strategically making sure that we're correcting the asset allocations to take full advantage and somewhat protect our clients. 


We wish you the best of investing success.

 

Sources:

 

Vlastelica, Ryan. “Why Stock Investors Should Be Welcoming the Return of Volatility.”MarketWatch, MarketWatch, Inc., 3 Apr. 2018, 11:28 a.m. ET, www.marketwatch.com/story/why-stock-investors-should-be-welcoming-the-return-of-volatility-2018-04-02.

 

Vlastelica, Ryan. “Stocks Plummet as Tech, Amazon Lead Broad Selloff; Nasdaq Negative for 2018.” MarketWatch, MarketWatch, Inc., 2 Apr. 2018, 4:24 p.m. ET, www.marketwatch.com/story/losses-for-tech-stocks-could-reboot-as-investors-return-from-easter-break-2018-04-02.

 

Wells, Peter. “Wall Street Suffers Correction for Second Time This Year.” Financial Times, The Financial Times Ltd., 2 Apr. 2018, www.ft.com/content/86a5f140-36a4-11e8-8eee-e06bde01c544.

 

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