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Are you ready for a 20% correction?

As the stock market makes new highs, investors tend to get greedy. They also begin to believe that what has happened in the recent past will continue to happen in the future. Actually, history shows the exact opposite. It is time to give the potential downside some thought. read more…

The Trump Dump

 

Investors were shocked this week when the U.S. stock markets fell almost 2% in one day. Wall Street blamed it on the growing scandals engulfing the White House. However, there was little follow through despite predictions that this was the beginning of the long-awaited pullback.

To be honest, much of the controversy coming out of Washington—demand for Trump’s impeachment, obstruction of justice, witness-tampering, etc.—is simply partisan politics deliberately fueled by a biased media. All of the above, which had been building for days, finally reached the tipping point for investors. As weak-kneed day traders started to sell, the program computers began to join in and the rest was history. Wednesday turned out to be the worst day of the year for stocks.

I actually think the carnage was a good thing. It furnished all of us a reminder that markets do go down as well as up. Ever since the November election, stocks have climbed. There has been little in the way of volatility and at most a mild 3% pullback in some of the averages over a few weeks. That is not normally how the stock market works.

However, we are human and the longer something continues, the more we expect it to continue into the future. When it changes, not only are we surprised but our first reaction is to cut and run. I am sure some of you did just that this week.

Over the last two days, stocks have regained about half the losses sustained on Wednesday. From a technical point of view we have at least a 50-50 chance that traders will push the averages back down to the lows that occurred on Wednesday. It’s called a retest. If we hold there (around 2,350 on the S&P 500 Index) traders will simply chalk up the event as a warning that somewhere ahead of us looms a larger sell-off.

You might ask why the pundits’ predictions of a further sell-off didn’t come true. The answer lies in how we are all being manipulated by politics and the media. The “experts” told us that all this Russian-inspired controversy, followed by the firing of the FBI director, and the creation of a special jury to investigate wrong-doing within the Trump White House would further delay what the market needs and wants. Tax reform, health care, infrastructure spending and much more would now be pushed back even further and further. It may not even happen at all if Trump were to be impeached.

And just as investors began to believe all this tripe, the White House has sent in its forces to reassure investors that all is on track on the economic reform front. Suddenly, the Trump budget will be announced next Wednesday offering all kinds of goodies to investors. At the same time,. Steve Mnuchin starts talking about 3% GDP growth again. And “The Donald” takes off for a five-nation trip, his first, today, which was sure to distract the media from its Russian witch hunt.

The moral of this tale for you and I is to continue to ignore the noise. Think of yourself as a batter who must keep his/her eye on the ball. That ball is the growth rate of the economy, (good), earnings (great), the Fed (moderate). Ignore everything else. Hang in there.

 

 

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Markets make hay

A series of new historical highs rewarded investors who remained patient this year and remained invested. Unless something changes in the world of central banking, there is a good chance that further gains are in store for the stock market. read more…

Tax breaks for college savings

As the cost of college continues to soar in America, more and more states are offering tax breaks to families who are trying to save as much as they can for their kid’s educational future. The state of Massachusetts is deciding whether or not they will join the list this week.

The most commonly used vehicle for that purpose is the ‘qualified tuition plan,’ more commonly known as a 529 Plan. These plans are sponsored by states, state agencies or educational institutions and were originally authorized by Section 529 of the Internal Revenue Service Code. They are tax-free on a federal level and all but eight of the 42 states that have an income tax allow families and individuals to claim a tax deduction on college savings. read more…

One for the Middle Class

middle classOn December 1, 2016, an estimated 4.2 million Americans could begin to see extra money in their paychecks. Some estimates project twice that number of workers will be affected by the roll out of new Department of Labor (DOL) rules governing overtime pay. read more…

Fourth of July started early for the markets

It wasn’t supposed to happen. After the British surprise vote to exit the European Union caught global investors leaning the wrong way last week, most traders expected a blood bath. Instead, after a two-day 5% sell-off, markets have regained almost 90% of that loss in the last few days. So how could the “smart money” get it so wrong twice in one week? read more…

Who is next?

The vote is in and all you have to do is look at world markets to discover the verdict. The citizens of the United Kingdom voted to exit the European Union. Chaos reigned for today but tomorrow may be a different story, at least for U.S. investors. read more…

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About Bill

Bill Schmick was born in a blue-collar neighborhood of Philadelphia, just a few blocks north of “Rocky Balboa” territory where most of his Catholic schoolmates grew up to be either cops or criminals. He narrowly escaped both professions by volunteering to fight in Vietnam as a U.S. Marine... Read More

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