December 7, 2021 Market Commentary
As of last week, three-month trailing returns for most of the well-known stock indexes like the S&P 500, Dow, and Nasdaq were all basically flat, giving up all gains made in October and November. See more details below on our portfolios’ present positions.
Our Biblically Responsible Portfolio Positions at this time
- Aggressive Portfolios: typically 98% to 99% equity/stock positions are presently at 86% equity/stock positions with the remainder in cash.
This portfolio’s Risk Number is 72*, which means it could be down 15.76% or up 25.33%.
- Growth Portfolios: typically 80% equity/stock positions are presently at 68% equity/stock positions with the remainder in cash and fixed income.
This portfolio’s Risk Number is 62*, which means it could be down 12.90% or up 20.93%.
- Moderate Portfolios: typically 50% to 60% equity/stock positions are presently at 37% equity/stock positions with the remainder in cash and fixed income.
This portfolio’s Risk Number is 44*, which means it could be down 8.05% or up 14.02%.
- Conservative Portfolios: typically 20% to 25% equity/stock positions are presently at 19% equity/stock positions with the remainder in cash and fixed income.
This portfolio’s Risk Number is 37*, which means it could be down 6.03% or up 10.61%.
- Ultra Conservative Portfolios: never have equity/stock positions but are always in cash and fixed income.
This portfolio’s Risk Number is 29*, which means it could be down 3.85% or up 7.38%.
*All Risk Number volatility percentages are based on 95% Historical Probability for six months and are used by our firm to remain as objective as possible in our professional investment management decisions. These numbers are from Riskalyze, a professional, paid advisor tool we use as a firm.
As you can tell from our above allocations, we are presently underweighted in equities/stocks, overweight cash/fixed income. Our goal at this time is to protect our clients’ large gains made over the last 18 months from all the trillion of dollars in artificial stimulus given to the economy by the government because of Covid-19. We will start moving back into our normal equity/stock allocations when we see the sideways trend turning, if it makes financial sense to buy at lower values for the long run or a combination of both.
We may see what is typically called a “Santa Claus rally” in December in the next three weeks, but this will probably be a complete head fake just like October and November were in the markets and could be given up in January. I’ve seen the markets do this many times in my experience.
Over the last 18 months, the Federal Reserve has put 120 billion dollars into the bond markets to stimulate the economy. Last week, Federal Reserve Chairman Jerome Powell indicated an acceleration of their timetable to reduce their ongoing bond market stimulation while also raising interest rates sooner than initially expected. The goal of the Fed is to have no new net purchases of bonds by mid-2022, but the path to this goal will depend on economic developments.
One outcome we may see when all the artificial stimulus of trillions of dollars diminishes and artificially low mortgage rates return to normal is a highly overinflated real estate market drop to more realistic levels. Real estate has seen 25-40% inflation in just the last year, and therefore many markets could dramatically drop to compensate. Real estate buyers need to consider if they would rather owe more by buying now at lower rates or owe less by buying later at higher rates if the mortgage payment could be the same. DISCLAIMER – In theory, lower interest rates normally equal higher prices, higher interest rates normally equal lower prices, but this is not always the case. Only history will tell if it’s different this time.
In closing, rest assured we are consistently monitoring events, the markets, and all our portfolios hourly, daily, and many times into the late evenings as well as very early in the mornings for your benefit as our clients.
As a Fiduciary-based firm, we act as your trusted financial advocate for you. We are here to serve you, not the other way around.
If you would like to discuss, please reply to this commentary by email or text/call us at 830-609-6986.
Here to serve,
CEO of Christian Financial Advisors
P.S. Let us not forget that it was 80 years ago today, December 7, 1941, that the Japanese surprisingly attacked the U.S. naval base at Pearl Harbor on Oahu Island, Hawaii, that precipitated the entry of the United States into World War II. The next day President Franklin D. Roosevelt said those famous words “…a date which will live in infamy in the United States of America…”