Weekly Talking Points 12/4/2017

Joel Faircloth, Aspen Wealth Strategies
  1. For a few minutes on Friday, the Dow Jones Industrial Average plummeted roughly 350 points on news that one of President Trumps advisors had plead guilty and was ready to testify that Trump had also participated in illegal activities. The selloff was swift, violent, and hit every sector. ABC News, who originated the story, quickly issued an updated report stating that Trump was not implicated after all. Markets quickly recovered.
  2. I have been talking about the possibility of President Trump either resigning or being removed from office for months now. To date, there is no evidence that he personally approved or participated in any wrongdoing, however the guilty plea of a top advisor in his administration has to raise concerns about how high the current investigation will reach.
  3. Fortunately, we already know how markets will react to a Presidential change. Back in May, we ran the numbers from 1974 when Nixon resigned and it’s not pretty. We should expect the potential for a 20-30% pullback in stocks in the event of a resignation or impeachment and removal from office. The good news is, as in 1974, the underlying economy is strong and a pullback may be temporary and could potentially even be a buying opportunity.
  4. All of this is open to interpretation of course. I stress that to date, there has been no evidence suggesting President Trump has done anything wrong, but they said they same thing about Nixon in 1973.
  5. On the economic front, 3Q GDP was revised up to 3.3% and home prices increased 6.2% yoy. Consumer confidence jumped on the expectations of tax cuts, and personal income rose 0.4% in October. Solid numbers across the board.

Bottom line

We cannot guess when the next correction is coming, but know this – it is coming. It’s just a matter of time. This is why clients have asset allocations and not 100% stocks all the time. I was speaking with a wholesaler this morning, and I mentioned that for the first time in a long time, I am getting the sense that there is some retail “greed” starting to take hold – the fear of missing out on returns can blur investors rational thought. When greed enters the market in full force, that’s the time we need to reevaluate our positions, but we are not there yet in my opinion.

About the Author
Joel Faircloth

Joel Faircloth

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Joel Faircloth has built his career through formal education, working for some of the top firms in the country, and by challenging convention. He brings an extensive breadth and depth of experience in the financial services industry and has worn many hats—operations, client service, compliance, trader, marketer, writer, trainer, and investment manager. Joel is a seasoned investment manager, strategist and leader. He believes in the idea that one person or a group of like-minded people can help change an industry, and this is what led him to Aspen Wealth Strategies.

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