The markets are going higher and higher. Tell me something I don’t know,” you say. “Not everything is going up.”
I started this article a week before the market selloffs began in early September. All summer we have watched the markets march higher and higher. But the numbers are a little misleading. A few stocks are driving the indexes higher.1 According to Steve Sosnick Chief Strategist at Interactive Brokers on August 24, 2020 said:
“Market breadth stinks. We are seeing a divergence between the main indices – which are increasingly dominated by a narrow group of stocks (the top 5 NASDAQ companies are about 50% of SPX2 and 25% of NDX) – and the broader market performance. That creates a big risk to the markets overall.”
Are we in the midst of a market decline? How far will the markets go down? It is hard to say, but the economy is improving. Herb Morgan from Efficient Market Advisors in his August 31st commentary said, “the economic data continues to be better than we expected…4” We are seeing the well-publicized V recovery happening.
As it may seem the markets are doing well, Apple, Amazon, Microsoft, Facebook, and Google are doing most of the work. Add Nvidia and Tesla for an additional 8% of the Nasdaq3. These stocks are leading the penguins higher. So, 7 companies, let that sink in, 7 companies are leading the market indexes. Financial, Utilities, Energy, and Real Estate companies have lagged the indexes.
This is a time that a diversified portfolio seems bad. Over the long run, however, the stragglers catch up and the leaders will take a break. We do expect increased volatility as we move into election season. We see no ‘panic’ on the horizon. We have made our portfolios a little more conservative and have increased cash modestly.5 It is still a good idea to maintain a long-term investment strategy.
New Custodian Available
For our brokerage clients, we use Interactive Brokers to custody funds and to trade investments. Starting in September, we will also offer Schwab as a custodian to our clients. Schwab is a $47 billion company and a household name for investment accounts. Schwab offers $0 dollar trade cost6 and .05 second average trade execution speed. We will not require any client to move to Schwab but rather offer this custodian as an option.
Amarillo Police Appreciation Event
On August 11th, we held an Amarillo Police Appreciation event at the Police Department downtown. We passed out 150 gift bags to the patrol officers of Amarillo. The purpose of this event was to show appreciation for our local law enforcement. Without police, we only have lawlessness. Our police officers have a difficult and dangerous job. Our goal was to do something positive and show appreciation for their service to our community.
The gift bag idea was Brian’s as he recalled how growing up, his family would send out ‘care packages’ to others in the family. It was a way to say we care, love you, and are thinking of you. The gift bags contained snacks, face masks, hand sanitizer, cups, sunglasses, pens, pads, towels, and other various items. The gift cards included in the bags offered free food from 5 Guys, Donut Stop, Bangkok Tokyo’s and Water Still. $10 from Allstate and free passes to Crunch Fitness was also included. Each bag had an $80.00 value.
In attendance to the event was the recent graduating police academy. Jimmy Johnson, Assistant Chief, said, “we appreciate the businesses for their donations… seeing this is like a hard reset.”
Sources Citations Bibliography:
⦁ An index is a method to track the performance of some group of assets in a standardized way. Indexes typically measure the performance of a basket of securities intended to replicate a certain area of the market. These may be broad-based to capture the entire market such as the Standard & Poor’s 500 (S&P 500), Dow Jones Industrial Average (DJIA), or more specialized such as indexes that track a particular industry or segment. Source: ww.investopedia.com
⦁ SPX – stock index fund based on the 500 largest companies with shares listed for trading on the NYSE or NASDAQ.
⦁ The Nasdaq Composite Index is the market capitalization-weighted index of over 2,500 common equities listed on the Nasdaq stock exchange.
⦁ efficient-portfolios.com/category/commentary/
⦁ Portfolios are managed individually. Your portfolio may employ a different strategy.
⦁ The standard online $0 commission does not apply to large block transactions requiring special handling, restricted stock transactions, trades placed directly on a foreign exchange, transaction-fee mutual funds, futures, or fixed income investments. See the Charles Schwab Pricing Guide for Individual Investors for full fee and commission schedules.
Supplemental Disclaimers:
This article is informational only and is not investment advice. This is not an offer to buy, hold, or sell investments like securities or insurance products.
Securities and Investment Advisory Services are offered though Toro Bravo Investment Advisors, LLC. Life Insurance and Annuities sold as an insurance broker are not a fiduciary relationship and are not offered by Toro Bravo Investment Advisors, LLC.
Securities or Insurance are not FDIC/SIPC insured and investments contain risk plus could be subject to loss.
Losses could be short term or permanent. Numbers and figures illustrated are hypothetical in nature and past performance is not a guarantee or indication of future results/performance.
We are not affiliated with the Social Security Administration (SSA), Internal Revenue Service (IRS), or any Governmental Agency.
Do not rely solely on the Legal, Tax, or Financial information presented for it may not be suitable for your individual situation.
Consult your legal, tax, and/or financial professional before acting on any strategy or recommendation (i.e. major changes or before initiating the purchase, hold, or sale of any investment or investment strategy).
Every individual’s strategy can differ depending on current circumstances and goals.