The Confident Chronicles July 1, 2024
Cool Charts Explained: Market Returns:
Last month I was asking if the last week of the month was a turn in a positive direction for the stock markets or if it was the beginning of a “summer rally”.
And it appears that the answer was, it was the beginning of a rally!
What we don’t know yet is if this was the start of a mini-rally or if it truly is the start of a “summer rally”.
The numbers above show everything was positive in June.
This is great news!
However, you will see with the next couple of charts, this might be a short lived rally and not one that can continue through the summer.
Even though the stock market had a great month, the last day of the month was not so good. Now this could be due to “window dressing” that is a game played by many mutual fund companies.
(“Window dressing” is when mutual fund companies buy or sell specific investments right before they “disclose” their holdings to the public. This causes artificial moves in the markets at the end of any given month).
So, again, time will tell if all the stock markets will continue to rise like they did in the month of May and June, or if the last day of the month is a precursor to what we will see in July.
So, stay tuned as we get the answers to these questions next month!
The above U.S Market Barometer shows that the market has been very volatile for the past few months. Every category was down in April and then up in May.
However, the only categories that did well in June was Large Cap Growth and Large Cap Core.
There appears to be a lot of confusion about the direction of the markets.
Combine that with the uncertainty of a presidential election that is rapidly coming.
And my guess is this is what we are going to be dealing with for a while.
This is why our Asset Allocation models use multiple categories for stocks and bonds. The ability to find a category with any direction for the past few months has been impossible.
So, be sure to pay attention to the emails letting you know to login to your Participant Dashboard and check out the new advice.
And do not hesitate to reach out to your financial advisor if you have any questions about your asset allocation and if you should make any changes to your models, as it is my prediction that this volatility is what we are going to be dealing with for the rest of the year.
Cool Charts Explained: S&P 500 Chart:
Let’s take a look at the chart above that I look at every day the stock market is open. This is a chart of the S&P 500 with several data points.
Specifically, it shows the following:
· RSI – Relative Strength Indicator (shows when the market is “over bought” or “over sold”)
· 50 / 200 Day Moving Average – (this shows where the market currently is based off of the past 50 and 200 days average)
· MACD – Moving Average Convergence/Divergence - (this shows the current “momentum” of the market)
Taken together, all three of these indicators are very powerful in trying to understand the “direction” of the current market.
All three of these indicators have “buy signals” and “sell signals”.
Much like the market barometer in the chart above this one, this chart shows a lot inconsistency throughout the whole year. The Relative Strength Indicator (RSI) recently fell below 70. This is a key benchmark showing the short-term direction of the market.
A number over 70 shows a market that is “over bought”. An over-bought market usually needs to correct itself with a short term selloff to bring the number below 70.
And the number just fell to 65 on Friday after the S&P posted a negative .41%.
The other thing that I see in the chart above is the MACD (Moving Average Convergence/Divergence) just turned negative.
When the red line goes above the black line, it shows that the “momentum” of the market is turning negative.
Now, what we don’t know is how long this momentum will last.
As you can see in the chart above, the MACD turned negative at the end of May, but then quickly turned positive in the first week of June providing us with positive returns.
So, time will tell if the negative market sentiment is only as short term “blip” or the start of a market selloff.
Be sure to check back next month!
PLAN CONFIDENCE MODEL UPDATES:
FUTURE CONTRIBUTIONS:
Future contributions are money that is added to your plan with every paycheck.
We monitor the future contributions monthly and are looking to direct these monies into investments that we hope to be “on sale”.
This would allow you to buy more shares in your portfolio.
This month we are advising that you use the following:
· Inflation Protected Bond
· Real Estate
· Technology
The exact amounts you should allocate depend on the model that you are using.
These categories may or may not be available in your plan. If they are not available in your plan, we will recommend the closest available asset class.
You can find all substitutions on your “Proxy Page” within your dashboard.
Please log into your Participant Dashboard to see the exact allocations you should be using as of today.
CURRENT ALLOCATIONS - STRATEGIC MODELS:
Our “Strategic Models” combine the benefits of asset allocation and “buy and hold” strategies. These models rebalance quarterly back to their risk “targets” and remain fully invested through all market cycles.
Our Strategic Models rebalance the first trading day of every quarter.
Below are the changes being made for this quarter
The exact amounts you should allocate depend on the model that you are using.
The categories we use may or may not be available in your plan.
Please log into your Participant Dashboard to see the exact allocations you should be using as of today.
Our Strategic Models are rebalancing on July 1st. You should have received an email at 9am EST letting you know to login to your Participant Dashboard to review the new advice.
As you can see from the chart above, there have been some changes from last quarter to this one. Specifically, the bond categories are moving money out of more aggressive categories and into more traditional categories.
The Stock allocations are also selling off many of the foreign categories and favoring the U.S. Large Blend and U.S. Large Value categories.
CURRENT ALLOCATIONS - TACTICAL MODELS:
Current Allocations are the monies currently in your plan.
Making changes to this money is known as a “rebalance”.
Some plans have trading restrictions on how often you can rebalance the money in your plan. Be sure to know your plan’s restrictions before implementing any strategies
There are currently no changes to the Tactical Models
The last update was on April 19, 2024
Our “Tactical Models” combine the benefits of asset allocation and “momentum investing” strategies.
These models rebalance periodically back to their risk “targets” and the targets can be changed at any time given the current market conditions. These models may go through periods of time while holding larger amounts of cash than the Strategic Models.
Our Tactical Models may rebalance on any given day.
Please be sure to look for an email from support@planconfidence.com letting you know when to make changes. Also, be sure to keep our “push” notifications “on” if using our app.
The exact amounts you should allocate depend on the model that you are using.
These categories may or may not be available in your plan.
Please log into your Participant Dashboard to see the exact allocations you should be using as of today.
Model Portfolio Rationale:
Plan Confidence relies on the research and model construction from BlackRock, Inc. (one of the largest asset managers in the world).
We use their “Target Allocation ETF Multi-Manager” model and “deconstruct” their allocations back to their asset categories so we can program the Plan Confidence™ Software.
We then map those categories as closely as we can to the available investment options that you have in your plan.
This update has been written by Kevin T Clark, RF™.
All opinions expressed are those of the author and not that of Plan Confidence Corporation nor any other firm or individual.
Kevin T Clark, RF™ is the CEO and Co-founder of Plan Confidence Corporation.
Kevin is an “ERISA Nerd” and one of only a hundred(ish) Dalbar certified Registered Fiduciaries (RF™) in the United States.
He has been helping hard working Americans invest their money since 1997!
Plan Confidence Corporation is an SEC registered investment firm specializing in providing advice to hard-working Americans investing in their employer’s retirement plans (401k, 403b, TSP, etc). They have created proprietary software so hard-working Americans can receive professional, ongoing advice on their employer’s retirement plan from an adviser of their choosing!
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