QUOTE OF THE WEEK
“Nurture your mind with great thoughts. To believe in the heroic makes heroes.”
- Benjamin Disraeli
TECH CORNER
Last week there has been a strong upward movement in the stock markets. With the economic data progressively getting worse, this rally is what can be considered a short bear market rally. This type of market movement to the upside is normal during a bear market. These moves are often short a sharp to the upside.
If you look at the chart of the S&P 500 from July of this year, what you see is a series of lower highs and lower lows. The trend of lower highs and lower lows is consistent with a bear market. On the other side, if we were in a bull market you would see higher highs and higher lows.
We have all the signs of a recession coming, if we are not already in a recession and not yet know it. We are seeing manufacturing declining, unemployment claims rising, and the start of credit spreads rising.
In the managed accounts we are positioned in Money Market and short-term Treasuries. In the variable annuities we are positioned in intermediate high quality bond portfolios. Over the last week or so we have seen a steady drop in interest rates. This has been good for our portfolios. Remember when interest rates decline bond values go up. We don’t yet know if this drop in interest rates is a trend. When we see a trend established in dropping interest rates, we will increase the bond duration to take advantage.
For now, we are playing it safe.
