Alert: Markets Weakening, Raising Cash

It looks like it’s shaping up for another ugly and volatile day in the markets.

There are myriad risks as we near the end of this now-decade long bull market: a US-China trade/currency war, slowing global economic growth (Germany’s economic growth turned negative during the second quarter), the U.S. 2-year/10-year spread inverted for the first time since 2005 (behavioral-driven selling could spread like wildfire), the Fed unusually cutting rates amid a market that is near all-time highs, political uncertainty regarding a roll-back of corporate tax cuts if there is a Democratic 2020 victory, and market structure (price-agnostic trading). 

Just like we said the market would melt-up in December 2018 (see image above) when we took the newsletter portfolios to “fully invested,” we think the base case may be a re-test of the December 2018 lows, and we might get there very quickly. Today, we are removing the Energy Select Sector SPDR and the Financial Select Sector SPDR from both the Best Ideas Newsletter and Dividend Growth Newsletter portfolio to arrive at a ~10% cash position in both newsletter portfolios (there is also a ~10% cash position in the High Yield Dividend Newsletter portfolio). You can view the Best Ideas Newsletter portfolio here, and the Dividend Growth Newsletter portfolio here.

We think members should expect the markets to come in aggressively in the coming months, but that doesn’t mean panic. Please don’t overreact. Right now, we’re prudently raising some cash on a couple out-of-favor ETFs that were added to the newsletter portfolio for diversification benefits. For investors that may want to bet more aggressively, the Exclusive short ideas could be a great consideration. Per member request, we have extended the offer to lock in the Exclusive through Saturday, August 17. As a reminder, the Exclusive publication is limited to 1,000 members, and be sure to contact us this week to lock in the annual pricing at $1,000/year (the pricing has already gone up on the website).

I wanted to keep some of the recent analysis we’ve completed in front of you. We updated our views on Berkshire Hathaway (BRK.B) here, our updated reports on the retail REITs can be found here, there is a great piece on how the Valuentum Buying Index kept us out of a catastrophe here, and you can read our update on Intel (INTC) here. For new members, please have a read of our piece on Amazon (AMZN), General Electric (GE), Kraft-Heinz (KHC), Disney (DIS), CVS Health (CVS) and Gilead (GILD) here. It walks through how to think about our methodology in the context of these ideas, especially how to conceptualize combining enterprise valuation with technical/momentum indicators in stock selection. 

Thank you,

Brian Nelson, CFA

President, Investment Research

Valuentum Securities, Inc.

brian@valuentum.com

———-

Valuentum members have access to our 16-page stock reports, Valuentum Buying Index ratings, Dividend Cushion ratios, fair value estimates and ranges, dividend reports and more. Not a member? Subscribe today. The first 14 days are free. 

Brian Nelson does not own shares in any of the securities mentioned above. Some of the companies written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.