Author: Patrick Clark
Covestor model: Market Neutral Growth
Disclosures: None
Last month (https://investing.interactiveadvisors.com/?p=10448), I described the markets as being at an inflection point. The shorter term trend was bearish, but we had not breached long term support. A move up would have indicated a resumption of the long term uptrend, but any move down would indicate a long term trend change from bullish to bearish.
Clearly, the market has made its decision, and we have breached long term support. The uptrend which began in the spring of 2009 is finally over. I say “finally” not because I want to see the destruction of invested wealth, but because the uptrend since 2009 was manufactured by the Federal Reserve’s relentless devaluation of the US dollar via the series of Treasury Bill purchasing programs referred to as quantitative easing. It was not built on a sustainable foundation. Its failure was only a matter of time. Quantitative easing is likely not over, but the investing public is currently in the process of realizing the program will not restart the US economic engine and the Federal Reserve is out of tools with which to put off the move down that has been due for the past decade.
Periods of sharp market direction change such as this can provide a great report card on an investor’s ability to manage risk. If one made money in early August, one has managed one’s risk well.
I reiterate my belief now that the most important priority is to protect one’s purchasing power. With the Federal Reserve printing a massive amount of dollars to manipulate markets, my outlook for the dollar continues to be bearish.
