The S&P500 Just Hit A Critical Number This Week

critical number

The Year In Money

Bloomberg spent time putting the following graphic together for us. They call it the Year in Money and it’s about what happened in 2018.

There were three graphics that really stood out to me that I want to mention because they will affect us all in 2019.

The first was the Bitcoin graphic that shows the coin dropping 83% in one year. I remember this move because one of my training clients had a significant amount in this coin at the time.

At the end of the training I asked him what stood out the most in the training. And he mentioned how I “almost forced” him to take some profits. Which he did. The point is not the advice but that he had an outside advocate for his money. And this huge drop reminded me of that.

You can see all the Bloomberg graphics here.

Global Debt Has Sored

The next graphic I liked was how Bloomberg showed Global debt. They compared 2003 Global debt to 2018.

Fifteen years of time created an additional 147% of debt. I know, it’s just a number and doesn’t mean much to most brains. But it should.

Global debt went from $100T to $247T in 15 years. That means every month between those two dates, the world added… wait for it… $820B in debt. Every month.

Most of this debt came from governments. But with money printing ended in the US and the Eurozone, it will be interesting to see how 2019 handles this.

You can see all the Bloomberg graphics here.

China, Japan and the Eurozone held rates at historic lows

While the US increased their Federal funds rate throughout 2018, it’s about time. The rest of the world didn’t.

Though the Eurozone stopped printing money as of December 13th, 2018. They kept their rates negative.

The same goes for Japan on the rate front. Japan is still holding tight on their negative interest rate policy and their money printing.

And although China’s rate is at a relative high 4% + they held too. The US stopped printing. The EU just stopped printing. The US is increasing rates. The EU is not… Japan is not. And China is not.

The stock market is losing (lost) two of its biggest supporters (read: printing in the US/EU and zero rates in the US).

Again, you can see all the Bloomberg graphics here.

Has The S&P500 Recovered?

Probably not. But it’s a good start.

How is that for an answer. As the days move past the 20% drop in the S&P500 Index at the end of 2018 the market has recovered 40% of those big losses. This is a good start. But there is a lot more healing the market is going to need to do.

And it’s going to have to do it without money printing from the Eurozone now.

Below is a price chart showing the 20% correction of the S&P500 Index, which officially was a 19.83% loss from close of market high to close of market low.

As you can also see, this most recent correction has also taken the price to right about the lows of 2018. This is an important price to watch.

Price above S&P 500 Index of 2580 is the line in the sand.

All price action above this green line (the exact green line I’m referencing is the second from the bottom) is bullish and all activity below it is bearish. S&P 500 Index (one year chart) with green fibonacci retracement lines.

S&P 2,580 matters. As its been defended three times in 12 months. AND now we have a retracement [almost] at the exact same price.

This does not mean you “leverage up” and go all in when the price is above 2,580 or go all “inverse fund” on me if the price is below.

The stock market has been hurt.

It may not fall any further than the December 24th 20% low but there is still a high likelihood of price volatility.

As many of you know. I do my best to keep investing powerfully simple. And that is why I sent out my first RED MODE ALERT in December after having zero alerts for thirty two months.

So all investors want to be clear about what their plan is in this “messy middle.” What will they do if the market breaks down further? And what will they do if the worst is over? AND they have to know this answer NOW.

Most investors don’t have a plan.

And that is what causes them pain. Not the Fed. Politics. Interest rates. Or trade wars… but not having plans. That. They. Can. Follow.

This is NOT the time to be 100% in cash.

Just because you are scared. It’s very likely the market will make one more big move higher before, what many consider will be a 50% to 60% fall.

But that (read: big fall) might not start for another 18 months. And then what? Lose all that time and growth?

The biggest take away…

1. The market is starting to “price in” the elimination of money printing by the Eurozone. Will the market take it well and move higher? Or…?

If we are not moving into a recession, which I don’t think we are right now. Then we’ll probably see new lifetime highs before new market lows.

But here’s the great thing, with the right approach you don’t have to predict and then react. The right approach will be able to adjust with either scenario.

2. The market has moved higher over the past ten years on the back of $820 billion per month in increased debt creation. I’m no economist but that seems unsustainable.

3. Price volatility in stocks, bonds, cash and commodities will be a familiar behavior in 2019. Now more than ever, investors need to be looking to a strategy that has been here before.

The best is yet to come. Here is a fun article about all the great tech that is coming our way. Its an article on the world’s biggest consumer electronic show, which is held in Las Vegas every year.

In Your Corner,

RCPeck-Dig Signature.JPG

RC Peck, CFP

P.S. Do you know if your portfolio is leaking? It probably is (too direct). I know because in the past 20 years I’ve never seen a portfolio that wasn’t leaking (and not from fees).

I’m willing to talk to you one-on-one about it. Get on my calendar and I can show you how to plug the leak.

P.P.S. The Fearless Wealth Method is as much the art of keeping yourself sane in an unfair and overwhelming world as it is a way to protect your money and future. Take the leap of faith and let’s talk about what’s really going on with your money. This is the easiest way.

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