Last week got off to a good start as the Dow Jones Industrial Average jumped 1.4% on Monday propelled by IBM’s strong outlook and renewed hopes for additional interest rate cuts by the Fed. However, the boost didn’t last as stocks headed south for the remainder of the week. Recession fears continued to escalate and mortgage-related write downs mounted. Thursday’s sell off knocked 306.95 points (-2.5%) off of the Dow as it closed at 12159.21, its lowest close since last March. On Friday, stocks popped at the open but the rally was more of an oversold bounce than a change in the near-term outlook. For the period, the Dow lost 507 points (-4.0%) closing at 12099, its fourth straight losing week.
Not much difference on the NASDAQ as it performed in line with the Dow. Big or small, growth stocks are out of favor right now as evidenced by continued weakness by the index. For the week, the NASDAQ lost 100 points (-4.1%) closing at 2340.
The Appleton Group Composites™
To say that the year has gotten off to a great start for our clients is an understatement. The Appleton Group Wealth Management Discipline has performed beautifully so far this year, leaving client portfolios either a bit higher for the year, or with low single-digit losses that are only a small fraction of the overall market losses – and that gap is significant. Our discipline prepares for both cooperative markets and uncooperative markets on the singular assumption that momentum type environments (like those we’ve largely been in for the last 13 years) will continue for many years to come. The momentum has clearly been on the downside for the past several months, and we’ve prepared ahead of time. And this has made all the difference in the world. As a significant piece of many client portfolios, our bear market investment selections have done their job, profiting from market declines in an effort to offset temporary weakness that may be evident in other portfolio holdings. When the market finds its footing, we will reduce these positions and re-purchase the same equity indexes that we’ve owned in the past, but now at significant discounts. THIS IS IMPORTANT: the significant amounts of cash and bonds and bear market investments are designed to be converted into growth positions in the future, so stay tuned – the fun is just starting!
Fun, you say? Yes fun. The market is simply doing what it has always done and will always do: converting both fear and greed into profit and loss. It is at times an imperfect and inefficient system for creating and destroying wealth, but it is wonderfully great at both. Being insulated from much of the negative effects of the markets is a luxury, because it means that either there is a very shallow hole to climb out of from time to time, or there is simply no hole at all. But the next step is the most important: realizing the wonderful gift that we’ve all been given (the comfort of stability during unstable times) and making good use of it to remain comfortable and to help others achieve the same level of comfort. Famed investor George Soros has a great saying: “When people are eager to buy, help them by selling. When people are eager to sell, help them by buying.” Through skillful and prudent decision-making (and a great structure for making it happen) we have the ability to do both.
Please visit www.appletongrouponline.com to learn more about The Appleton Group Composites™.