Good morning,
First, I want to thank all that have stopped by and visited … but, most of all I’d like to thank those that have made comments. My desire in making my recent post on the market’s decline was to energize some discussion. If you feel inclined all comments are welcome. I titled this post “Its Buckle-Up-Time” after BobC’s comment yesterday made in one of my post.
It is now day five in the New Year for the markets. It seems, it is buckle-up-time as we are now perhaps riding for a fall until earnings season begins later in the month. Thus far we have had six straight loosing sessions and the market’s worst start in history according to some.
As I write, at about 2:00 Am Eastern, in checking the state side futures this morning, the S&P 500 Index is in the green while Greater Europe is down along with Greater Asia being mixed. From the 52 Week High the S&P 500 Index is down 9.0% and year-to-date down 4.9%. So, if this is the big correction that many have been calling for we still have a ways to go.
In reading what Jeffery Saut, Market Strategist at Raymond James, has to say on the subject believes we are now in a “Selling Stampede” which usually last for about twenty days. If this is the case, January is shaping up to possible being one of the worst on record. I’m also thinking big money is driving the direction of the market as they reduce their leveraged positions while some investors are being sold out to meet margin calls.
This will be a good time to test my risk tolerance and asset allocation settings as down markets are a good time for investors to discover if they have their asset allocation set correctly. Often times some investors will discover they have taken on to much risk. I’m thinking I most likely will be wishing I was at the low range of my allocation for equities at 45% rather than the mid range at 50% where I was when this mess started. The high range for me in equities would be 55%. I have been thinking equities were overvalued for sometime and I should have been more prudent and gone to the low range of equities within my asset allocation a few months ago. After all, I did reduce my fixed income allocation. However, most all of my equity funds pay good dividends and I am invested based upon my desire to generate a certain amount of income. If I had cut my allocation in equities I would have also reduced my income. Short term bond funds have little yield so I did not want to raise my allocation in bonds there nor did I wish to go to longer duration funds for better yield due to rising interest rate risk. Thus a neutral position in equities is the route I took. Overall my portfolio generates a yield of about 3.4% on invested assets and a distribution yield of better than 5% which includes mutual fund capital gain distributions, interest and dividends.
As of December ending 2015 my asset allocation according to Morningstar’s Instant Xray analysis was 25% cash, 20% bonds, 35% domestic stocks, 15% foreign stocks and 5% other. This allocation puts me heavy in cash, light in bonds, and neutral in stocks. I am still with the thoughts over the long haul stocks will out perform over bonds and cash.
I am not going to lighten up in equities at this time … but, I might if we get into a rebound rally and earnings fail to materialize as projected. Thus far I have not lost any sleep and feel my allocation is set about right for me based upon my risk tolerance and income needs. So for now, I am buckled in tight and looking for a good entry point to open a spiff (special investment position) thus putting some cash to work in a down market. I will let you know when and how I go about doing this in another post.
Below are a few links you might find of interest.
http://finviz.com/futures.ashxhttp://markets.wsj.com/usoverviewI wish all … “Good Investing.”
Old_Skeet
Comments
Since, earning season begins on Monday with Alcoa reporting after market close I thought I'd move this post forward and update the post. With Friday market close I have the S&P 500 Index down year-to-date about 6.0% and off its 52 week high by about 10.0% thus moving into correction territory.
Hopefully, earning season will give us something to start crowing about. I added a little to my position in DEQAX late Friday afternoon thinking earnings are not going to disappoint and perhaps the markets will now start to turn upward as we move into reporting on Monday. I am also thinking this fund should do ok in a rising interest rate environment.
I did not open a special investment position but rather decided to add to a couple positions starting with DEQAX. Test the water and see how this goes and if things go well, I may buy a little more in some other funds. Not a lot just rounding out some positions.