Where are we, at the end of November?
November was another great month for the stock market in a long string of great months.
Clients keep calling me and wondering when the good times will end. There are so many pundits out there (especially with specialized products to sell) who keep calling for the end of this bull market. The argument sounds like something along the lines of “the bigger they are, the harder they fall”. I know a couple of things about the stock market, having studied it and having made a few mistakes over the years:
- Bull markets climb a wall of worry (this is an old saying, I did not invent it)
- Bull markets don’t crash in the blink of an eye – they spend time transitioning from bull to bear
If you look historically at bull to bear transitions, they can take months – months of lower peaks and lower valleys. This was true even in the late 1920s. Before the 2008 market crash, the market peaked in 2007 and then worked its way lower by degrees, until the crash in Sep 2008. After the tech frenzy peaked in 2000 we had a steady diet of lower peaks and valleys leading into the tanking after 9/11/2001 and then in 2002. That’s right, for whatever reason, likely coincidence, the markets were even giving warning signs leading up to 9/11.
We will have corrections that could drop the markets 5 – 10% and we will probably not be able to avoid those, but the big crash that takes years of growth out of everyone’s account has always come with some warning. That’s the one I’m looking out for and the one I’m just not seeing yet. We still have rising peaks and rising valleys. I understand that nothing worthwhile is exactly easy but I’m going with the odds.
How Did the Markets and our Funds Do?
All index and fund returns are courtesy Morningstar.com.
Every index I follow was up nicely in November except the diversified emerging markets (foreign country stocks from countries like China, Korea, Brazil, India, etc), biotech and the US aggregate bond Index. The bond index is the only one that concerns me a little because it has to do with rising interest rates. FORTUNATELY, we hold money in the peer to peer lending space (LENDX) and floating rate paper (CFRAX) so that is offsetting some of this. If it persists, I will likely move some money away from the offending fund(s), which have been RNDLX and FNMIX.
Some of our funds appeared to underachieve in November but they overachieved in October (e.g. FTEC). Things cycle around.
|Morningstar Diversified Emerging Mkts||0.45%|
|Russell 2000 (small co)||2.75%|
|US Aggregate Bond Index||-0.13%|
|IEMG||0.13%||iShares Emerging Markets||Fidelity commission free stock ETF|
|FQAL||3.65%||Fidelity Quality Factor||Fidelity commission free stock ETF|
|ONEQ||2.32%||Fidelity Nasdaq||Fidelity commission free stock ETF|
|FTEC||0.93%||Fidelity Info Tech||Fidelity commission free stock ETF|
|FHLC||2.83%||Fidelity MSCI Healthcare||Fidelity commission free stock ETF|
|FMAT||-0.49%||Fidelity Materials||Fidelity commission free stock ETF|
|FIDU||2.72%||Fidelity Industrials||Fidelity commission free stock ETF|
|FBIOX||0.09%||Fidelity Biotech||stock mutual fund|
|FSMEX||2.94%||Fidelity Medical Equipment||stock mutual fund|
|CFRAX||2.14%||Catalyst floating rate||bond mutual fund|
|FFRAX||0.10%||Fidelity floating rate||bond mutual fund|
|RNDLX||-0.57%||RiverNorth Strategic||bond mutual fund|
|FNMIX||-0.57%||Fidelity New Market||bond mutual fund|
|LENDX||0.69%||Stone Ridge Alternative||peer to peer fixed return mutual fund|
|Prime Meridian Small Bus LP||0.61%||1 month lag||private peer to peer fixed return|
|Prime Meridian Real Estate LP||0.65%||1 month lag||private peer to peer fixed return|
|KIP, Kay Income Partners LP||0.56%||private mortgage fund|
Your investment return(s) for the month of November was/were as follows:
We should talk if you would like to review exactly where you stand or if we should consider a change. I am available at your convenience. I have Skype video in case you would like to do a video conference.
Darrell J Kay
Kay Investments, Inc