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We hope you find the articles on our blog informative and helpful. You are always welcome to chat with us if you have any questions about your personal financial situation.

The US Dollar - 2020 Trends & Beyond

We are dedicating todays Blog article to the US Dollar and how it has been tracking almost inversely to the US stock market this year. At the height of the COVID onslaught in March and April of 2020, we saw a steep rise in the US dollar to a new 3 year high as investors rushed to safety in the worlds reserve currency while US and global markets fell in rapid succession as the impact, risk and global spread of COVID was priced into the markets. Conversely, as stock markets rallied back to their pre-COVID highs we have seen the dollar steadily fall. A vast injection of liquidity by the Federal Reserve which dwarfed Bernanke's quanititative easing during 2007-2009 eased concerns, risk and pressures on the financial system which in conjunction with close to zero interest rates has fuelled a wave of money seeking higher yields.

At some point in the future, the Fed will reign in its uber generous bond-buying and liquidity injections. However, that point is unlikely to arrive in the next two years which means that investors appetite for seeking yield is unlikely to taper off until that point. An IPO boom coupled with strong market growth is likely to continue into 2021 not-withstanding any new black swan events.

A weaker dollar eased conditions after the 2007/8 financial crisis and it appears that this trend will be mirrored in 2021/2022. We expect the US economy to pick up considerable steam as we come out of a brutal 2020/2021 Winter and optimism around emerging post-COVID lifts people's spirits and business investment. A strong US economy coupled with a weaker dollar and close to zero interest rates should provide the impetus for the stock market to perform well.

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Why Navigating the Markets and Your Financial Future Require a Clear Head?

In a sea of constantly moving variables, navigating the markets (an art and science unto itself) and your financial future ( think taxation, IRA's, life insurance, pensions, other critical insurance, the amount needed for your retirement, estate planning) and the situation can be over-whelming. We cannot see the future, so at best we can imperfectly try to predict it based on historic data and patterns that can often repeat.

In order to successfully navigate and compute all of the above variables and potential changes so that you can both protect and maximize your financial future, you need an uncommonly clear head which comes from experience, expertise, knowledge and the ability to adapt. It's not unlike any profession. However, when it comes to your finances the wrong decisions can have an irreversible impact on your life and loved one's.

As a former airline pilot many years ago, you qickly learn there is no room for "error". The entire process from take-off to landing requires meticulous attention to detail and any flaws in judgement can have life and death implications. This training has served me well over the 28 years of my financial advisory career. We have a significant ammount of money under management for our clients and this alongside each families complex financial situation and requirements requires precise calculations, ongoing calibration and clear navigation.

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Why Moving Averages Are Simple But Powerful Indicators for Investors

Moving Averages are simple but powerful indcators for investors as they reflect a prevailing trend in the price of a stock, fund or indices, over the short, mid and long term. They can be used alone or in combination with technical analysis or Dow Theory, for example, to chart both primary trends and secondary counter cyclical trends.

There are two principal moving averages used by investors:

1. A Simple Moving Average is a historic weighted average price indicator for a stock, fund or market indices. The objective is to provide an average weighted indicator of the stock price that evens out daily or weekly fluctuations in price. A simple moving average takes the artihmetic "mean" of historic prices over a set period of time whether that is 9, 15, 20, 50, 100 or 200 or more days in the past.

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What is Dow Theory & Is it Still Relevant?

Dow Theory Charles Dow and Edward JonesDow Theory was first conceived and developed at the end of the 19th Century by Charles Dow, who along with Edward Jones and Charles Bergstresser founded the Dow Jones Industrial Average in 1896. While Dow Theory was developed by Charles Dow, he was unable to complete his ideas around this as he died in 1902. it was later expanded upon by by William Hamilton in the 1920s, Robert Rhea in the 1930s, and E. George Shaefer and Richard Russell in the 1960s.

So what is Dow Theory? Dow Theory is a trading methodology that is based on the efficient market hypothesis. Charles Dow believed that the market was - in aggregate - a good indicator or measure of the the state of the economy or confidence in the economy. Therefore, if one could analyze the overall market, one could identify trends that could forecast the direction of the market and individual stocks.

Part of the analysis included an observation that markets experience three layers of trends. The primary layer or trend is that markets are either in a bull or a bear market. Within each of the latter primary trends there are secondary trends working against the primary trend such as pullbacks or rallies, but these occurr in the context of the primary trend which prevails while in motion. These secondary trends can last from 3 weeks to several months. Lastly there a tertiary trends which are minor and may last for a week or two or three and represent static noise.

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Short Term Trading vs. Long Term Investing - Who Are The Winners?

With so much talk in the news of day traders and investors, we thought it would be useful to discuss whether the allure and excitement of short term trading outweighs the more boring strategy of long term investing. On the surface, day trading or short term trading appears to be a relatively easy way to make money. With Tesla and Apple and other tech stocks posting such enormous gains in a relatively short time frame, what is so complicated about doing that?

The reality is that timing the markets and individual stocks in the short term is very challenging for the professional traders with all the tools and technology at their disposal, which makes the odds of success even more stacked against non-professional short term traders. There are periods in time where short term trading strategies can work swimmingly but this this is not the case over the long term.

It is well documented that in general for the most part, buy and hold investors often outperform short term traders (after tax and other costs are factored in) by 6-7% per annum. There are always a small number of day or short -term trader success stories that are promoted by the media of course, but the reality is that over the long term most day or short term traders are not successful and eventually lose money.

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Hawley Advisors
1600 South Main Street, Suite 190
Walnut Creek, CA 94596
Phone: 925-906-9800
Fax: 925-906-9884
info@hawleyadvisors.com

 

 

Hawley Advisors is an investment advisor, registered with the State of California. Any investment ideas or strategies on this website are for the purposes of education and general information only and should not be construed as specific investment advice. For more information about our firm please check the SEC Public Disclosure website: https://www.adviserinfo.sec.gov/

 

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