Market Thoughts - Page 2 of 3 - Buetow & Spitzley Wealth Management

March 13, 2017 By John Buetow

IS AN INTEREST RATE HIKE COMING?

Based on the “Fed Funds” futures market, it is about a 100% chance that the Fed will increase interest rates at its meeting next week (the week of March 13-17). According to the same futures market, the odds of a second rate hike in June are better than 50%.*

Before everybody panics, let’s take a deep breath and see what the actual impact of this is. The only interest rate the Federal Reserve controls is short-term Fed Funds rate, which is the rate Banks and Credit Unions lend to each other on an overnight basis. Historically, interest rate increases have been in 25 basis point increments. Prior to the market meltdown in 2008, the federal funds rate was in the 4.00% range. It is going to take quite a few 25 basis point increases to get back up to a more normal rate of 4.00%. Finally, the markets have anticipated interest rate hikes for years and increases have already been priced into the markets.*

In short, interest rate hikes are really much ado about nothing.

*The Stansberry Digest. March 8, 2017.

These are the opinions of David Eifrig and not necessarily those of Cambridge, are for informational purposes only, and should not be construed as investment advice.

February 14, 2017 By John Buetow

TIME TO CHECK OUT GOLD AND SILVER AGAIN?

So far this year, the Dow Jones Industrial Average is up 0.87%*. Not bad, but let’s take a look at how our gold holdings have done this year. Physical gold (coins and bullion) is up 6.59%**.

At $1240.30/ounce, gold is a bit pricey. Silver gives us a comparable hedging strategy, but at a significantly lower price, $17.79/ounce***. Year to date, physical silver (coins and bullion) is up 8.21%***.

If you will recall, both Gold and Silver had a terrific first half of the year last year, before pulling back. We don’t how things will play out this year, but at this point, it appears we are seeing the same set-up for 2017.

* Historical Quotes. Jan 3, 2017 and Feb 8, 2017 prices. Dow Jones Industrial Average: 19,881.76 and 20,054.34.
** Gold spot prices, APMEX. Jan 3, 2017 and Feb 8, 2017. $1163.60 and $1240.30.
*** Silver spot prices, APMEX. Jan 3, 2017 and Feb 8, 2017. $16.44 and $17.79.

These the opinions of John Buetow and not necessarily those of Cambridge, are for informational purposes only, and should not be construed as investment advice.

January 13, 2017 By John Buetow

HOW MUCH LONGER DOES THE TRUMP EFFECT CONTINUE?

Since the election in November, we have experienced the Trump effect. What exactly is the Trump effect? Rising stock prices, falling bond prices, a stronger US dollar, and falling precious metals prices.*

As we entered the first trading week of 2017, we have started to see a reversal in the Trump Effect: The US dollar pulled back 1.6% on January 4^th and 5^th• The yield on the 10 Year Treasury fell 2.36% (meaning bond prices went up). Gold has jumped up 2.05% in the three trading days of 2017. *

The moral of the story: Stay diversified

*Daily Wealth. January 7, 2017

These are the opinions of Justin Brill and not necessarily those of Cambridge, are for informational purposes only, and should not be construed as investment advice.

November 15, 2016 By John Buetow

STOCKS SOAR WHEN REPUBLICANS CONTROL IT ALL

This is not intended to be a commentary on the results of the recent Presidential election. Irrespective of how the election turned out, 50% of Americans were going to be very happy and the other 50% were going to be bitterly disappointed.

Conventional wisdom tells us that the stock market does best when the three branches of government are shared by both Republicans and Democrats. Not so fast! In two more months, the Republicans will control not just the Presidency, but also the House and Senate. Going back to 1950, this “trifecta” has occurred just twice, once from 1953-1954 and again from 2003-2006. In the first instance, the stock market was up 35.80% and the second time it was up 61.20%.*

Many investors today are filled with panic because of the uncertainty of a Trump presidency. History tells us not to worry so much.

*Daily Wealth Premium. November 10, 2016

These are the opinions of Dr. Steve Sjuggerud and not necessarily those of John Buetow or Cambridge, are for informational purposes only, and should not be construed as investment advice.

October 17, 2016 By John Buetow

THE END OF NEGATIVE INTEREST RATES?

Prior to getting into this commentary, a quick reminder that bond prices move in the opposite direction of interest rates. With interest rates generally declining since the 1980’s, bond prices have enjoyed a bull market for the past 30+ years. According to Jeffrey Gundlach, aka the “Bond God”, we may be seeing the 30 year bull market in bond prices coming to an end. This is certainly a contrarian viewpoint, but often when everybody says something can’t happen (such as interest rates going up), that’s exactly when it happens*.

Irrespective of whoever wins the November election, both Mr. Trump and Ms. Clinton have promised massive infrastructure programs which would require massive Government spending, which would then require more Government borrowing, which would then require the Government to sell more Treasury Bonds, which should push down bond rises and raise interest rates*.

You should be asking this question: Isn’t this exactly what the Fed has been doing for the past eight years? The answer of course is yes. The follow up question becomes: How is this going to be any different? Gundlach predicts that central banks, i.e. the Fed, will be forced to raise interest rates to avoid a total collapse of the global banking system*.

Is Gundlach right? Maybe, maybe not. If he is right, our strategy is to buy short maturity (1-2) year CD’s and “ladder” your portfolio up as interest rates go up. Our portfolios hold ample Cash and are liquid enough to allow us to use the “CD ladder” strategy.

Further evidence that Gundlach may be right is that we have seen the yield on the 7-10 year Treasury (IEF) and the 20+ year Treasury (TLT) both rise over the past several weeks, resulting in a corresponding drop in the share prices of both securities.

* The Stansberry Digest. October 10, 2016

These are the opinions of Jeffrey Gundlach and Justin Brill and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.