Last week, I was in Las Vegas presenting at the first annual retreat of our sister operation, the National Institute for Cannabis Investors (NICI). While I was there, I realized just how many investors need to know what’s going on with the markets and the economy, and how they can be prepared for whatever chaos gets thrown at them.
The fact is, the S&P 500 was down on Oct. 2, up on Oct. 4, down on Oct. 8, and up again yesterday. The situation is crazier than ever.
That’s why it’s time to buckle up and learn the tools you’ll need to protect your profits in a sideways market.
The key to staying afloat will be your skills at portfolio management. Inparticular, you’ll need two of my favorite techniques that are perfect for times like these.
First and foremost, the market has been choppy for a couple of months now. I believe it will continue that way, but mostly trending down for the next few weeks.
Above all else, Wall Street hates uncertainty. That explains why we see rallies followed by retreats as new data points come in, some questioning the economy’s strength and others showing that things are actually going well in the U.S.
It seems that, right now, the Street is more concerned about global macro factors than what is actually happening here at home.
This past Tuesday, the Wall Street Journal had a blazing headline on growth outside the U.S. It said that the International Monetary Fund (IMF) and the World Bank are warning of a “deteriorating global outlook.”
This grabbed a lot of attention for a very simple reason. Leaders of both groups will be in Washington next week for a series of meetings with the world’s finance ministers and central bankers.
Kristalina Georgieva is the new head of the IMF, and she comes across as a bit of a downer. She recently noted that the “global economy is in a synchronized slowdown.”
The IMF now expects slowing GDPs in 90% of the world. Her firm’s research shows that trade tensions, especially those between the U.S. and China, could trim about 0.8% of the global economy’s value next year.
Talk about timing. Her remarks took on added significance because of a move the U.S. made yesterday in its trade battle with China. It added 28 new firms to the list of those the U.S. is blacklisting.
This move has absolutely nothing to do with the rest of the ongoing trade tensions. The administration is doing this in support of Muslim minorities who the Chinese have been harassing. It still has many investors and professional traders worried, however, that it could cause a rupture in our trade negotiations.
In other words, if you just glanced at the headlines yesterday, you’d never know how good things are here in the U.S.
The Strong Outlook for America
Let’s start with the jobless rate. It still remains at a 50-year low, where it has hovered now for many weeks. It was at 3.7% in August but fell to 3.5% last month.
Unlike Wall Street, consumers are not freaking out. Consumer confidence remains near five-year highs as measured by the Rasmussen Reports Economic Index. It held steady in September and was tied at an index rating of 140.8 based on the firm’s proprietary standards.
Not only that, but as a sign of the nation’s mood, President Trump’s monthly approval rating rose slightly in September. Based on polling of likely voters, Rasmussen said Trump had a 48% approval rate compared with 47% in August.
In the meantime, politics remain front and center in the nation’s psyche. The U.S. House has launched an impeachment inquiry against Trump.
That’s relevant for investors because it adds to the uncertainty of how stocks might respond through the end of the year.
We do have some data on the matter. In the summer of 1998, as the House prepared impeachment against Bill Clinton, stocks sold off en masse, but by the time the Senate voted to keep Clinton in office in early 1999, the market had more than made up for all its previous losses.
So, we could see more declines before a big rebound…
And with so many cross currents to sift through, this is exactly the time when our savvy portfolio management tools come in handy.
How you can be Confident When the Market is Sideways
It all begins with superior stock selection. Time and time again, we have found best of breed stocks that can beat the market by 300% to 900%, and often by even more.
We have a great tool for turning volatility to our profitable advantage. Our unique Cowboy Split is designed to pick up more shares when our stocks decline by 20% from their entry points.
No, it doesn’t always work. I don’t know of a single trader on Earth who gets it right 100% of the time, but this staggered entry system keeps us from getting stopped out and sets up for the renewed rally.
And remember, we don’t throw caution to the wind. After the lowball limit order triggers for the second half of the trade, we set our stops right around an adjusted 20% loss.
The one thing I learned from the NICI member feedback I got while I was attending the retreat in Las Vegas is how many investors love the Free Trade. By that I mean, when a stock doubles, we sell half so that we have all our original capital back. We then protect our profits with trailing stops.
This is a very powerful weapon because it means you end up owning a group of top-flight tech and biotech stocks basically for free.
Add it all up and you can see that we have a plan in place to adapt to whatever the market throws our way and come out with our hard-earned capital and profits well in hand.
Cheers and good investing,
Michael A. Robinson