This quarter’s corporate earnings reports have been stellar. With about 40% of S&P 500 companies having now reported, 91% beat analyst expectations, the highest level on record according to Refinitiv.  But that doesn’t mean their stock prices rose as a result.  In fact, unless a company raised forward guidance, the stock probably treaded water or dropped.  Even some stocks that reported ‘triple plays’ (earnings beat, sales beat, raise guidance) traded lower on the next day’s opening (for example, Apple, McDonald’s and Visa).  Bears say this is evidence that stocks are ‘priced for perfection.’  We think it is a sign that many individual stocks are in correction mode even though the broader averages are making new highs.

If the Democratic tax bill passes, will it be retroactive to January 1, 2021? There have been several instances in the last 25 years when a new tax act was made retroactive to the first day of the year it was enacted.  However, in each of those situations, the retroactive change was a tax reductionThere have been no retroactive situations in the last 25 years when a tax act increased taxes and the effective date was prior to the date of enactment.  Why might that be the case?  One reason is that tax increases are unpopular and one way to make the tax increase more palatable is to delay its implementation giving individuals advance warning and time to manage their affairs around the effective date.

The stock market continues to make new highs. When will it end?  Judging by the pools of cash lying around, it could be a while.  Money is piling up in people’s accounts.  Money market accounts often viewed as ‘dry powder’ sit at almost $4.5 trillion.  A more obscure balance, the Federal Reserve’s count of money on deposit with commercial banks, has risen 33% from 2019 to $17 trillion (source:  Bloomberg).

The bar chart below shows that a good portion of this cash is finding its way into stocks.  Apparently that $17 trillion is burning a hole in investors’ pockets:

All the cash on the sidelines may help explain why investors are buying the dips in this market advance.  They don’t want to be left behind as the major averages hit new highs.

DAY TRADING VERSUS BUY AND HOLD

How do day traders generally perform in the stock market?  Is their belief they can outperform the market justified?  Given the majority of market-moving headlines occur either after the close or before its open each day, it makes sense that a large portion of the equity market’s overall move would come during after-hours trading.

As the graph below shows, since 1993 when SPY began trading (SPY is a S&P 500 ETF), buying the close and selling the next day’s open results in a cumulative gain of 920%.  Sounds pretty good.  The real shock, however, is the performance of the intraday strategy.  This captures SPY’s cumulative change when the market is open:  buying the open and selling the close.  Had you done so as a day trader, you would actually be down 2.5% since 1993!

Source:  Bespoke Investment Group
 
The point of this exercise is to show how much of the market’s historical move has occurred outside of regular trading hours – all of it!  If a day trader thinks their strategy is a winner versus a ‘buy and hold’ strategy, hopefully this analysis is an eye-opener.

Knowledge – Results

Experts in Risk Management

Are you prepared for the next market correction or financial crisis?

Knowledge – Results

Experts in Risk Management

Are you prepared for the next market correction or financial crisis?

Knowledge – Results

Experts in Risk Management

Are you prepared for the next market correction or financial crisis?

Knowledge – Results

Experts in Risk Management

Are you prepared for the next market correction or financial crisis?

Real Retirement Solutions

designed to improve
  • Wealth Preservation
  • Management of Risky Assets
  • Peace of Mind

This is achieved through an ongoing assessment of market risks given your specific financial situation and goals.

Get Started

Professional Expertise

Leadership Team

Richard Furmanski

Richard Furmanski

CFA

has been a portfolio manager and analyst for over 35 years. He manages conservative, tax-efficient portfolios for both pre-retirees and retirees. His lower risk approach appeals to investors who want less volatility and competitive risk-adjusted returns.

View full bio

Mary Ellen Adam

Mary Ellen Adam

Director of Operations

has been in office administration for over twenty years. Her experience includes customer service, firm operations, and office administration. She interacts with our clients on a day-to-day basis and handles any requests that may arise.

View full bio

Frequently Asked Questions

If you can't find the answer to your questions here, feel free to give us a call at 847-847-2505

Do you manage both stock and bond portfolios?

Yes. We build a portfolio of conservative, high-quality stocks and hold them for the long-term. The average holding period is 4 – 5 years. Our focus is on stocks that are suitable for retirement portfolios.

Our high-quality bond portfolios are designed to provide both income and stability of principal. Bonds provide the anchor for balanced accounts (those holding both stocks and bonds).

What is your investment philosophy?
We take great care in purchasing only high-quality stocks and bonds intent on a multi-year holding period. Portfolio turnover and taxable realized gains are modest in comparison to other active managers. We do not time the market but will become more defensive, in terms of stock holdings, when market conditions warrant.
Will the portfolio be managed in accordance with my financial goals?
Yes. Each of our clients has a custom-tailored portfolio. These custom portfolios are designed to meet specific client objectives with a thoughtful approach to specific constraints such as risk tolerance. And as each client’s situation changes, the portfolio does as well. There is no cookie cutter approach.
What kind of expertise do you have and how can that help me in difficult markets?
We have been working with high-net-worth clients like you since 1982. Over that time we have helped them to navigate several bear markets and financial crises (including the stock market crash of 1987). We hold the Chartered Financial Analyst (CFA) and Certified Financial Planner (CFP) designations.
Are you sensitive to taxes when managing portfolios?
Yes. Our holding period for an individual stock averages 4 plus years which means our turnover is low and realized gains can be carefully managed. Further, where possible, we tax loss harvest small losses as a way of offsetting gains taken elsewhere in the portfolio.
How have you performed?
Results will differ by client and the level of customization but we have provided competitive investment returns for many years.
How do you charge for your services?
We charge a management or consultant fee based upon the size and level of customization of the account. As the account grows, we benefit together.

Recent Commentaries

Stay up to date with all of our latest comments and analysis.

January 2025 Market Commentary

The S&P 500 has had a 20%+ return for two years in a row. It has only rallied 20%+ in back-to-back years three...

November 2024 Market Commentary

With an YTD gain of 22.1% through yesterday, the S&P 500 is on pace for its second annual 20% gain in a row. Surprisingly, that has only happened two other times:  first, three times in a row from 1954-56, and second, four years in a row from 1995-98.  However,...

October 2024 Market Commentary

China may be our biggest adversary, but the health of their economy and markets are important to the U.S. They are a major trading partner and their markets contribute to overall global stability. Chinese policymakers are finally alarmed enough to shift out of low...

September 2024 Market Commentary

August was a roller coaster for stocks. Moves lower in a roller coaster market can be terrifying, and in the first three trading days of August, investors had to contend with economic data showing what looked like a sharply decelerating economy and the unwind of the...

Monthly Updates

November 2024 Mid-Month Recap

As we mentioned in previous commentaries, Barron’s Big Money Poll represents the thoughts of large U.S. investment advisors. Their opinions and forecasts are what is discounted in stock and bond prices.  We think that is important. The recent fall edition of the Poll...

October 2024 Mid-Month Recap

INVESTORS BALANCE SHEET – PROS AND CONS Here are a few of the pros and cons investors should consider when forming an opinion of the stock market.  It is always important for investors to look at both sides of the argument even if they feel strongly in one direction,...

As a current or near term retiree you have real concerns…

We provide dedicated solutions
Contact Us