January 2019

Happy New Year! This month has been the most volatile month I have ever seen. Obviously, the level of volatility corresponds to the level of uncertainty in company valuations, the economy, and larger macro-economic variables. With these uncertainties, it is unsettling to have any money in the markets. The Federal Reserve has been raising interest rates to levels we have not seen in a decade, and that is attracting a lot of investors for the safe harbor government bonds provide. So my position for the beginning of 2019 is the same as the last quarter of 2018, I'm still strong on the economy and the stock market. I'm long on the current economy, and while Sears is close to being liquidated, other companies are filling the void, and then some. I am concerned about the larger macro-economy, specifically tariffs and Brexit, and the impact these two events will have on the US economy and stock market. The tariff war is likely to continue for the next few months, if not longer, and this will create daily and monthly fluctuations in the stock market, but I believe, in the long term it will work out in our favor, and I see no need to invest in the F Fund as a protection. Brexit is also likely to continue to cause issues, both with the I Fund and the C Fund. I do not think any of the Brexit impacts are priced into the market at this point so when it is finally resolved, we will likely have a rally in the FTSE as certainty about the UK markets will return. Finally, I think corporate bonds (F Fund) might be riskier as well as many formerly strong companies (GE) are nearing junk status. Keep investing!