December 2021 Update

Money is a tool. It's something that supports your life!

Our final blog of 2021 sees possible sideways trading trends peeking around the corner. Stephen shares his technical comments and his interesting charts and tweets. As well, Ashley talks us through reviewing our budgets - no matter how scary it might seem. And we share a great tip sheet on year end tax planning this year. We want to wish all of our readers a very Merry Christmas, Happy Holidays, and a Happy New Year!

Merry Christmas, Happy Holidays, and Happy New Year from the Biddle Johnston Wealth Management Team!

Our team would like to thank you for another wonderful year, and we hope you and your friends and family have a fun and festive holiday season!

We leave you with our final blog post of 2021 - an interesting year, to say the least, for market performance. Stephen gives his technical comments regarding the close of November's S&P, and the probability of sideways trading. He also shares his interesteing tweets and charts, plus a good run down of our management philosophy. 

Ashley keeps us updated on her progress for Financial Independence in the Millennial Minute this month. She covers her first budget follow up and gives a challenge to our readers to track their holiday spending this year.

Our Planning Topic for the month includes a great topic of 2021 Year End Tax Planning. Amidst all the holiday hustle and bustle, it's a good idea to keep the tax planning on your mind so you can be better prepared come income tax time next year. It's a great little read!

We hope you enjoy this month's blog and again, have a very Merry Christmas and a Happy New Year!

They grow up so fast!!

We want to take a second to say HAPPY BIRTHDAY to our four legged team member, Maui! 
Stephen spoiled him more than his kids on their birthdays! And who could blame him?!

Baby Maui:                                           Big Boy Maui:

Interesting Charts

1) With minimum wages failing to meet rising inflation year after year, it's no wonder younger generations are working 2 - 4 jobs to make their way in the world...

2) As stocks continue with over-inflated evaluations, the US stock market has climbed to unimaginable new heights. Do we label this new red circle "COVID"?

 

3) China gets a lot of flack for being one of the world's top polluters - but let's not forget all of the processing that China does for most of the world. With that much processing power, it's no wonder why keeping relations is a top priority.



4) If done properly, tapering can help relieve the pressure of rising prices and ultimately benefit businesses. However, this also runs the risk of popping speculative bubble prices that were driven by low interest rates...

Technical Comments

• The November monthly S&P 500 candlestick was a bear bar. It closed near its low with a long tail above, and it also closed below October high.
• It is a sell signal bar for a failed breakout above the Sept-Oct OO (outside-outside) pattern.
• If there is a selloff and it breaks below the OO, that would trigger an OO sell signal.
• But because the bull trend is so strong, it is a minor sell signal. That means the best the bears can probably get is 2 or 3 sideways to down bars to maybe a little below the October low.
• However, when there is a reversal from an extreme buy climax, the market often enters a trading range. For example, the S&P 500 went sideways for 2 years after the January 2018 buy climax.
• Therefore, while the S&P 500 might make a new high in December or early in 2022, it probably will not last long. There is better than a 50% chance of at least a couple months sideways to down trading beginning within the next few months. It might have already begun.
• Is this the start of a correction? The S&P 500 has been in a strong bull trend since the pandemic crash. There have been a few times when the bears got the probability of a correction up to 50%, but never more. If there is follow-through selling next week, this will be another one of those times.
• The probability of higher prices has been between 50 and 60% during this entire bull trend. It has never been below 50%. That continues to be true.

The Portfolios

Our risk management philosophy is well defined by Robert Rubin, former Secretary of the Treasury:
 
“First, the only certainty is that there is no certainty. Second, every decision, as a consequence, is a matter of weighing probabilities. Third, despite uncertainty we must decide and we must act. And lastly, we need to judge decisions not only on the results, but on how they were made."
 
Most people are in denial about uncertainty. They assume they’re lucky, and that the unpredictable can be reliably forecast. This keeps business brisk for palm readers, psychics, and stockbrokers, but it’s a terrible way to deal with uncertainty.
If there are no absolutes, then all decisions become matters of judging the probability of different outcomes, and the costs and benefits of each. Then, on that basis, you can make a good decision.”
 
The markets can defy logic, fundamentals, and reality in the very short term. However, those are the only things that matter in the long term.
 
Stock market cap-to-GDP, price-to-sales, margin balances, cyclically-adjusted price-to-earnings ratios, and others argue convincingly the stock market is grossly overvalued. Moreover, the relationships between valuation and fundamentals remain grossly dislocated. Markets may move higher, but to advocate aggressive equity allocations under current circumstances ignores warnings of bubbles past.
 
Owning well-selected fundamentally cheap companies makes sense. Otherwise, limiting equity allocation exposure is prudent until reasonable opportunities return. Raising cash, setting stop losses, and hedging risk will be critical in 2022.
We can’t predict market outcomes. The most we can control is the impact of outcomes through the risk management process.
“If you don’t have an umbrella when it starts raining, it’s too late. “
 
November was a quiet month in the portfolio. We trimmed GFL.  We add new positions in Trade Desk, Unity Software, BIG Commerce,and Invesco S&P 500 High Beta Equity ETF.  We also added to out S&P 500 tactical position decreasing our cash to 10%.


Returns on our 60/40, 70/30, and 80/20 portfolios before fees: As of December 8, 2021

 

 

The Millennial Minute

Have you all been following your new budgets in November? The holidays make saving and difficult and over spending all too easy. Come check on my progress as you evaluate your own. Don't worry! No budget is perfect, and changes should be made as you go!
Click here to read more!

 

Planning Topics

2021 Year-End Tax Planning Tips: Since many tax strategies require foresight to be effective, tax planning should be a year-round activity. However, as year-end approaches there are still opportunities to consider in order to reduce your 2021 tax bill. The following are year-end tax savings strategies that may be available, depending on your personal situation.
Click here to  read more!


Members of our Planning Team:
We also would like to remind you that we have an extensive team of experts that we work with. From Business Succession, to Retirement Planning, even to mortgages, we have the professional advice and service you may be looking for!