Beware of Stock Market Seasonality in Bear Markets

Steady Wealth Podcast

Beware of Stock Market Seasonality in Bear Markets

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The stock market is a complex entity, and there are many things that can happen which are difficult to predict or fathom. One such thing is stock market seasonality, which tends to be more difficult to predict during bear markets. Bear markets are defined by their volatility, and making money during a bear market is difficult. Past bear markets, such as the year 2000 and the 2007-2009 financial crisis, were marked by extreme volatility and were difficult to trade.

Seasonality is a pattern that can be observed in the stock market. For the S&P 500, it is typically hard to predict how equities will perform between February and March, with January-March being choppy with big rallies, sell-offs, or markets that go nowhere. The second half of March and April are typically good months, while May and June are consolidation months, and July and August are generally non-eventful. September and October are historically difficult and choppy, and November and December have big risk moves at year-end.

During a bear market, stock market seasonality is more prone to emotions, with more news flow that can surprise people. However, one of the more reliable patterns is the Q4 rally, which typically rallies into the first half of December. In 2022, this pattern was observed when the market bottomed in October and rallied into mid-December, up 17%. It is important to use multiple analysis points at any given point in the cycle, rather than relying on single-factor analysis.

Bear markets are tough to trade because different players come in non-traditionally, and the retail community, given more of a voice with social media, can impact the market in unexpected ways. However, despite ongoing bear market conditions, the bull spirit of the retail community persists, with very few people being truly concerned.

What You’ll Learn:

• Why bear markets tend to last, and how they play out in the second half.
• Why it’s so hard to make money in a bear market.
• Why the Q4 rally tends to be more reliable and how to capitalize on it.
• Why you shouldn’t use single-factor analysis.

Favorite Quote:

“The bear market is not over, but the bull spirit of the retail community is certainly not done yet either.” -Serge Berger

Why Stocks Could Rally Into The Spring

Steady Wealth Podcast

Why Stocks Could Rally Into The Spring

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We may see stocks continue to rally over the next few weeks to months. To understand why, we must first understand where we fit in the bigger picture. If you don’t understand things like the economic cycle, it can be very difficult to make money, often chasing false rallies, or selling in false sell-offs. As we’re all painfully aware, interest rates have gone from about .5% to about 5% in the last 18 months. While they have gone up this high before, they never have this quickly. It’s inevitable that we’ll have credit issues, we just don’t know how severe or when. It always takes awhile to work its way through the system.

If you didn’t catch last week’s episode where we discussed the recession playbook, consider going back and taking a listen. We’re essentially right on track with inflation cooling off and starting to come down. This usually means the equity market will rally sharply. We already saw a surprise rally in Q4, and a hot January jobs report kept the rally alive. With 10x more money in the market than during the 2008 financial crisis, we’ve already seen the Nasdaq rebound 20% for the year. With the Nasdaq going up 50-60% before, there’s still plenty of room for improvement. Just have patience, things will take some time to play out.

What You’ll Learn:

• Why you have to understand the bigger, global, macro picture.
• What the Q4 Surprise Rally usually looks like.
• How political timelines can influence the stock market.
• And much more!

Favorite Quote:

“We, as human beings, have gotten increasingly impatient. Things will take some time to play out.” -Serge Berger

The Recession Playbook for Investors and Traders

Steady Wealth Podcast

The Recession Playbook for Investors and Traders

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Over at Blue Marlin Advisors, when the economy goes into a recession, there’s a specific playbook they employ. A recession is not necessarily all that critical, it’s how the market responds to it. Recessions are actually a normal, and important, part of the economic cycle. If we look back over the years, we can clearly see this repeating cycle of some sort of growth phase, a peak, and a slow down or retraction. For people that know how to work with the retractions, economic slow downs can actually be good.

Currently the slowing down of the economy is being accelerated. We had a very favorable market for many years, which peaked with the pandemic rescue funds. Late 2021, early 2022, the FED started to realize what was going on, and began to raise rates aggressively. At some point, you then get higher equity prices. As inflation tends to slow down, people get hopeful and rally, usually buying up what was popular at the peak. The more macro-oriented, however, will be keeping a close eye on the credit markets. We just saw rates go from basically 0 to over 5%. While the FED has hiked rates that high before, they’ve never done it this quickly. It takes time for things like this to move through the system, but we’ll definitely start to see credit problems coming in soon.

There’s a lag between bond market pricing and what the FED does. That’s why the federal funds rate may not move, but bond markets will start to improve. It’s a hope rally, and it’s what we’re seeing right now. When we get to the point where the equity market is getting ready to capitulate, equity managers tend to start to panic. We’re not really seeing a lot of panic yet, but when we do, it’ll be a great time to buy risk asset stocks. If you know how the economic cycle goes, you can usually stay one step ahead. If you’d like to find out your risk level for current economic times, head over to Blue Marlin Advisors for a free consultation.

What You’ll Learn:

• What an economic cycle looks like.
• Why all parts of an economic cycle are so important.
• How economic slowdowns can be good for some.
• Where we’re at in the economic cycle right now.

Favorite Quote:

“Every part of the economic cycle has a distinct asset class mix that’s perfect for your portfolio.” -Serge Berger

The Pros and Cons of ETFs in Your Portfolio

Steady Wealth Podcast

The Pros and Cons of ETFs in Your Portfolio

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Over the last 20+ years, ETFs have increasingly become a staple in many people’s portfolios. From an investing and trading perspective, there are a lot of reasons for this. From tradability and tax-efficiency, to diversification and transparency, ETFs can be a great option. Other times, they aren’t the best option. Let’s look at the pros and cons.

For tradability, unlike mutual funds, ETFs can theoretically be traded in and out throughout the day. In fact, there are many people who do day-trade ETFs. The flexibility and liquidity are main reasons why people gravitate towards ETFs. When it comes to tax efficiency, ETFs go through less capital gains than most other options out there. If you want to diversify, ETFs are a great choice as they cover most major asset classes. If transparency is important to you, consider that most ETFs disclose holdings on a daily basis.

Now, a lot of the pros of ETFs can also be cons in some scenarios. For instance, if you hold ETFs too long, there are management fees involved. While they are usually less than those of mutual funds, they’re still there. For liquidity, there are some ETFs that don’t have the volume to be able to liquidate easily, so be aware of this. There’s also a potential for less diversification, as many individual stocks within ETFs have a lot of overlap. While the pros seem to outweigh the cons, you should always be aware of the potential for cons.

If you’re an individual investor that wants to trade, check out The Steady Trader, where there are lots of individual trade alerts and research to tap into. If you have a portfolio and need an investment advisor, visit us at Blue Marlin Advisors and get connected.

What You’ll Learn:

Why ETF’s don’t appeal to some people.

Why ETF’s should be a part of your portfolio.

How ETF’s can help you gain exposure to different markets.

Why you should always check the liquidity of an ETF.

Favorite Quote:

“ETF’s are great products if they’re being treated properly.” -Serge Berger

Common Mistakes Self-Directed Investors Make with Kate Stalter

Steady Wealth Podcast

Common Mistakes Self-Directed Investors Make with Kate Stalter

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Getting set up for retirement is important to a lot of people, and a financial portfolio is often the way that is done. Today, Serge is joined by special guest, Kate Stalter, to discuss the common mistakes people make with their portfolios. Kate got her start in the financial industry working for Bill O’Neil at the Investor’s Business Daily. She reached a lot of people through speaking engagements with IBD, but knew she wanted to work closer, one-on-one, with people. She accomplished that by getting into the registered investment advisors business. While she’s witnessed a lot of success stories, she’s also seen a lot of common, and easy to avoid, mistakes made.

As we come off of a 12 year stretch where it was easy to make money, it’s hard to get people to understand that what worked then won’t work now. So many people have gotten into the habit of trading the flavor of the month, and not sticking to a strategy that was designed for what they wanted to accomplish. Both Kate and Serge have seen it time and time again. Self-directed investors will usually lose money in the long run.

It’s important to be broadly invested, but people usually have a bias toward their own country, their own region, and stocks they are familiar with. Self-directed investors get caught up in breakout stocks like Tesla, Amazon, and Apple.  Most of the time it’s based on the hype created by financial media. Serge and Kate both agree it’s so important to understand that financial media are not your financial advisors, they really are in the entertainment business. They are beholden to their sponsors, not to you. Likewise, subscribing to a financial newsletter is not personalized advice. If you truly want a strategy that is tailored to you, you need a financial advisor.

If you’ve lost money in the stock market, don’t be ashamed. Just like someone who isn’t a dentist wouldn’t pull their own tooth, you are not a stock market expert. Even though the financial media will try to tell you it’s so easy, it’s really not. Experts will know the right questions to ask as an objective third party. If you’re curious what a financial advisor could do for you, head over to Blue Marlin Advisors, and sign up to have your portfolio looked at.

What You’ll Learn:

What it means to be broadly invested.

Why you should separate your emotions from your money.

The overall success rate with constant trading.

What questions a financial advisor might ask you.

Favorite Quote:

“The financial media are not your financial advisors. They really are in the entertainment business.” -Kate Stalter

How to Double Your Portfolio Income

Steady Wealth Podcast

How to Double Your Portfolio Income

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With the current state of the stock market, one might be wondering how you could double, triple, or even quadruple your portfolio income. The answer is with bonds. Bonds might not be as exciting as the stock market, but they’re where earning potential lies in our current market. A lot of people still don’t understand, or maybe just haven’t accepted, the giant shift we’ve had in 2022. That shift directly correlates with the rise in interest rates. We may have seen these interest rates in the past, but we’ve never seen them go up quite this quickly.

While many publicly traded companies have taken big hits, it’s actually easier now to make money in the markets than it has been in a long time. It is very much dependent on people taking action now though. Take a look at your portfolio and notice how heavily it relies on stocks. Now, rebalance your portfolio to include more fixed income or bonds. The easy money policy has come to an end for the time being, but where high interest rates are bad for stocks, they’re good for bonds. Bonds can take down your investment risk by half and increase your earnings by at least double.

If you don’t already have an investment advisor and would like someone to take a free, comprehensive look at your portfolio, visit Blue Marlin Advisors. Let us show you how you can reach a certain target return by investing with less risk than ever before.

What You’ll Learn:

• What the Modern Monetary Theory, or MMT, is.
• How Covid impacted the MMT.
• What we can expect for interest rates over the next few years.
• And much more!

Favorite Quote:

“I’m not speaking against trading, but I have dramatically changed how I trade, and what I trade.” -Serge Berger

New Era in Investing and Trading Where Patience is Key

Steady Wealth Podcast

New Era in Investing and Trading Where Patience is Key

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The old saying, ‘patience is a virtue’, is true in the trading and investing world of today’s markets. In December, Serge received 10-15 inquiries from people getting ready to retire, who wanted to take more charge of their finances and be more involved in the markets. The problem with this is once people get more involved and passionate, they tend to overtrade or jump on the first thing that comes across their desk. Patience is one of those things that has seemingly gone by the wayside as instant gratification has become the norm. Many investors become chart chasers, meaning they look for, and invest in, the latest breakout trends. But, Serge says that era has ended for now. While commodities may see some chart chasing opportunities, in general, chart chasing is over.

Most people have done well for the last 12 years or so, but not because they were geniuses at picking good stocks. It was because the general market went up. We saw historically low, almost 0%, interest rates. Interest rates now are around 5%, making it a much different ball game. In today’s markets, we need to be more focused on macro economics. That doesn’t mean you have to become an economics professor, it just means you have to do a little more research. Investors are going to want to keep a close eye on the dollar index and interest rates, as there is a direct correlation between the dollar going up and equities going down. So again, patience will be key. Don’t fall into the trap of overtrading, as, historically speaking, it’s only worth it to trade during about 20-30 days in any calendar year. Most people trade much more often than that. If all of that sounds like too much for you, you may want to consider getting an investment advisor.

What You’ll Learn:

• What the Modern Monetary Theory (MMT) is.
• What macroeconomics are.
• What the Average True Range is and why it’s important.
• And much more!

Favorite Quote:

“Patience is one of those things that we, as human beings, aren’t very good at.” -Serge Berger

Commodity and Energy Super Cycle

Steady Wealth Podcast

Commodity and Energy Super Cycle

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While conducting an end of year review, Serge came to the conclusion that we’re very clearly in a commodity and energy super cycle.  While the length of a super cycle is usually hindsight, it’s looking like it could be from 5 to 20 years. For a long time, the energy sector wasn’t doing anything, and then between 2020 and 2022 it went up 50%. Energy stocks have gone from 3% of the S&P allocation to 5%, but could easily go up to 8, 9, or even 10%. For perspective, tech stocks make up about 26%, financial about 12%, and industrial about 9%.

With new technology coming on the market, and things like the electric vehicle revolution, the S&P allocation is bound to see some shakeup. As we move away from fossil fuels for example, electric vehicles will use things like copper and graphite.The future demand for these things will steadily increase over the next 5 years. Graphite for example, is forecasted to see a 17x demand. Even coal has seen a large increase. While it’s still a small percentage of all energy, we’re using more coal than ever. Long story short, energy is important to the human race and definitely isn’t going anywhere.

What You’ll Learn:

• The top reasons we’re still very bullish on commodities and energy.
• How trends in the stock market are calculated.
• How the electric vehicle revolution will affect the stock market.
• Why people are giving up commodities as an asset class.

Favorite Quote:

“Energy is such a trending part of the market and shows absolutely zero chance of ending anytime soon.” -Serge Berger

Key Takeaways From 2022

Steady Wealth Podcast

Key Takeaways From 2022

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As we head into 2023, we’re looking back on and discussing the most important takeaways from 2022. To put it simply, 2022 was the first ugly year in terms of returns for a lot of people. When we take into consideration that the average age on Wall Street is 35, and the last bull market was 12-13 years, we know that most young traders have never seen a bear market. The tip of the iceberg that nudged us over into a different era for markets was 2020. Covid hit and we saw a lot of stimulus money going out in 2020 and 2021. This resulted in a big spike in inflation.

The change in market wasn’t solely a result of covid however. A large factor was 10-15 years of way too loose monetary policy. We saw historically low interest rates, but interest rates don’t stay low forever. If we look at the US treasury market, we’ve been in a bull market for 40 years. These long stretches of bull markets led to complacency with many traders. People have become conditioned to buy in the dip, and sentiment takes time to change. The key to investing and trading in 2023 will be lots of research and well thought out moves.

What You’ll Learn:

• The biggest financial takeaways from 2022.
• How Covid did and didn’t affect the market.
• What signs point to things being too good to be true.
• What to expect in 2023.

Favorite Quote:

“We’re going to have to become more researched investors and traders.” -Serge Berger

The Time For Capitulation

Steady Wealth Podcast

The Time For Capitulation

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As the year comes to an end, Serge finds himself asking why investors haven’t capitulated yet. Most people’s portfolios are down, many 20-25%. Usually we’ll see investors lose 30%, and be down an average of 6 months, before they start to panic. Retail investors tend to be more emotional, which unfortunately, causes them to sell at the bottom. To avoid this, we must have perspective. Investors need to have a broad idea of what’s going on in the economy.

On the other hand, many will end up buying at the high. People get so turned off when they sell at the low that they either never get back in the market, or they wait too long. The key is in de-risking before you go too low, and then buying as soon as you notice that initial snapback. To be successful across all types of markets, we must learn how to remain cool when our portfolios are down. One way to gain knowledge that can help you stay a step ahead, is to sign up for market alerts at TheSteadyTrader.com.

What You’ll Learn:

• What it means to capitulate.
• How to avoid selling at the lows.
• How to gain perspective on the market.
• Why not many people have thrown in the towel yet.

Favorite Quote:

“When we don’t have perspective, that is when we tend to make irrational decisions.” -Serge Berger