#180: Boring Markets, Dangerous Investors

Boring markets

The S&P 500 has currently gone 40 sessions without as much as a 1% move up or down. The planet is a wash with $123 trillion of negative yielding bonds. Central banks now hold $25 billion of financial assets which is more than the combined gross domestic product (GDP) of the US and Japan. Investors are having to seek yield by buying stocks. Is this why the market is going up and earnings are accelerating? We think not.

 dangerous investorsBored investors, bored central bankers

The jobs number came out Friday with 151,000 jobs created. That number is 300,000 below expectations. That report is neither great nor terrible. The jobs that have been added are lower paying jobs. The jobs number is just adding to the “ho hum” of the economy. This is creating bored and dangerous investors, as well as bored central bankers.

Feeling the need to do something

There is no crisis to fix but there’s no confidence either. Yet, central banks from around the world recently met at the G20 Summit and restated their commitment to doing whatever it takes to fix this major problem. None of the central banks are admitting negative interest rates aren’t working or the $1 trillion the European Banks has instituted isn’t really boosting anything. The European Central Bank, in response to this boredom, is looking at the possibility of buying stocks, as well as bonds, because they are about out of bonds to buy. They have no other options left.

dangerous investors Dangerous investors

Typically with individual investors, when the volatility index (VIX) is so low for a long time, it creates complacency. Then the markets spike because these individuals get bored and make irrational decisions. You would think the “adults in the room,” the central bankers, would not fall to this same problem, but that seems to be the case.

Stagnant markets since 2014

Earnings for the S&P 500 companies peaked in 2014 and have been stagnated since. We now have a market going up because people are trying to capture yield, but what really moves the markets, earning’s growth, is not happening. That is the fundamentals of the markets. This is why the markets will move quickly and then flatten for a long time. There is not that fundamental element that will consistently move the markets higher and higher.

dangerous investorsWho is missing the point

Technology makes up 20% of the S&P 500, up from 13% in 2002. Technology is allowing us to live life better but it is also forcing the issue of deflation. We are not hearing this issue from the Fed or from political leaders from around the world. An example would be Netflix which has 3,700 employees. Blockbuster, who Netflix put out of business, employed 60,000 people. There’s your difference. Technology is making life better but, at the same time, it’s taking away jobs. What the central banks are doing has nothing to do with Netflix or other technologies. It’s a perceived problem their model doesn’t know how to fix.

dangerous investorsDon’t become a dangerous investor

If you are bored with the market, you are not the only one. There is a difference between a bored investors and a shrewd investor. A bored investor feels the need to take action when none is needed. A shrewd investor understands that patience can be your greatest strength. Even some of the greatest investors, who have become bored, make stupid mistakes because they thought they needed to take action.

Emotional vs fundamental investing

At Fi Plan Partners we are constantly looking for opportunities that are based on the true fundamentals of the markets and technical analysis instead of knee-jerk or emotional reactions. Hang in there with us. We believe there will be plenty of opportunity coming down the path if you are patient. We will keep you updated.

Please keep sending us your comments and concerns and you can always call us at your convenience.


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Greg Powell, CIMA
Wealth Consultant
Email Greg Powell here

Ashley Page, JD, MBA
Senior Vice President
Wealth Consultant
Email Ashley Page here

Trey Booth, CFA®, AIF®
Vice President
Senior Vice President
Email Trey Booth here

Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Economic forecasts set forth in this presentation may not develop as predicted.

No strategy can ensure success or protect against a loss.

Stock investing involves risk including potential loss of principal.

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