Week 1 (October 1 – 5):
Fed interest rate hikes are the new source of market volatility. Cramer says that he doesn’t like this market. Given his experience, that’s a big red flag. Cramer also suggests that the sell-off has begun. Another red flag. Generally, stocks do well during rising rates until, of course, the Fed goes too far. Right now the Fed is still below a neutral discount rate or Fed funds rate target. Thus, while the Fed is still accommodative, at some point the sell-off will be overdone and buying will once again dominate. Once the Fed hits neutral, which shouldn’t be for about a year or so, then you will want to be much more wary.
I will only recommend a few stocks under these circumstances. BPT is still going up strongly so you might just ride that for a while. Others worth holding are near money’s such as MINT, USTB, FLTR, and ICSH. These last ones pay 2 – 3% and are tied, more or less, to the Fed funds rate. Thus they will pay more when the Fed increases rates. BPT is an oil royalty trust and pays about 16% as a dividend. You can still get that for October. Moreover, it is going up along with expectations for higher oil and gas prices. Leveraged inverses like TVIX and TZA are also possible as long as you are around to keep an eye on them. That’s all I have for now. Good investing!
Week 2 (Oct 8 – 12):
The selling is over or nearing an end. Wednesday and Thursday created opportunities in my view. If you think that buying a whiskey distillery just before the end of prohibition would have made you rich, then buying marijuana stocks now should also make sense. October 17 and November 1 open the scope of the pot markets substantially. During the sell off on Wednesday and Thursday I started positions in two ETFs, HMLSF and MJ, which increased on Friday by 4.26% and 4.92% respectively. I also bought the companies ACBFF, CGC, MMNFF, and TGODF which had respective Friday increases of 8.13%, 5.62%, 29.44%, and 8.94%. I’d say that was pretty good money for the week! If any of these stocks or funds pull back next week, you may want to consider building similar positions. I think the long-run potential includes returns of 50% – 500% through 2019. That is my advice for this week. Good investing!
Week 3 (Oct. 15 – 19):
The market may still be setting up for more selling so be ware. Can’t yet call the bottom because what selling is still going on is pretty tame and organized. Sold my cannabis stocks into Monday’s early morning buying and realized about a years worth of gains in just a few days. Once Canopy (CGC) gets down to around $40, I’ll probably start to buy back in. In the meantime you might want to research some growth stocks such as ANDE, SNDR, ARCB, and GLP. A good ETF for the long-run but that measures market sentiment in the short-run is IHI. I am watching IHI for an indication of the market bottom. Other ETFs for long-run growth are XLV and VHT. Some good dividend growth stocks to consider are ENLK and ARLP.
If you start any new positions I’d move slowly until the market looks healthier. That might be when people either get used to higher nominal interest rates which were held at zero for far too long.
The reason they were so low for so long was that market socialist policies on the supply side of the economy during the previous administration slowed economic growth which led the Fed to try stimulating the economy on the expenditure side. We were heading into another recession before the last election. If Hillary had won we’d be there now. After the last election, we had two supplied side positives (tax cuts and less regulation). Then we added a negative supply-side policy involving trade obstruction (i.e., tariffs or equivalently tax increases). Now we have another negative effect due to Fed tightening that adds even more uncertainty. Yet, the Fed cannot slow interest rate increases much because it still has to unwind its balance sheet to get back to normal. Selling off its financial assets lowers there prices and increases market interest rates. Unwinding will take quite a while. Thus, get used to this situation and the market volatility it causes. Once there is over selling among stocks, there will be opportunities. I’d keep ICSH and MINT loaded up and used to take advantage of market opportunities like the previous few weeks among pot stocks. In the meantime they will reward you with increasing dividends because their returns are directly related to the Fed Funds rate. Be sure to buy them on their ex-dividend dates which are the first of each month so as to get more shares for your money and preserve your capital. Good “opportunistic” investing!
Week 4 (Oct. 22 – 31):
Selling before the midterms in November has probably ended. That is the only uncertainty handled. The Fed and Tariff policy remains. Because of this, I think the systemic risk in the market is the government. It offsets deregulation and tax cuts so that there is nothing left to propel the market forward other than economic fundamentals and earnings. These are still fine. Technical analysis suggests that the market is 1) oversold and that money must be put to work and 2) that there is likely more severe selling that will occur in the near future. This is not a clear message so beware!
Consider the growth stocks ENVA and HSII if you feel safe enough to invest. ETFs to consider for dividend income are HDV and OUSA. An ETF for growth in healthcare is XLV. My personal preference is to just hold ICSH and wait for its dividends to increase along with short-term interest rates. Once the Fed causes a market crash that is yet more severe than we experienced in October, start looking for stocks with PE multiples below 15 with good future earnings potential. If we get a trade deal with the EU and China, start looking sooner. Gee, what market uncertainty could there still be? Good luck and good investing!
