FM Wealth Management Newsletter
For our long term clients and those that have followed FM Wealth Management for years, know that we utilize the FM Wealth Management Wave analysis to track the markets. We follow within the context of the Markets’ smaller and larger cycles. To that end, we are neither permanently bullish nor permanently bearish. We see the markets as they are, and not as we believe that they should be.
While everyone was getting very bullish in late 2015, FM Wealth Management warned that we were setting up for a S&P 500 (SPX) to drop from the 2100 region back down to the 1800 region. We also warned that investors should not get too bearish, since that pullback would set up the market for a multi-year rally to over 2600 in the SPX.
Some may recall that in early 2016, most analysis you were likely reading was preparing you for the inevitable market crash that everyone seemed to be certain was just around the corner. At the Same time the FM Wealth Management Wave analysis put the market in appropriate context, and that analysis showed that we likely had several more years to come before the bull market which began in 2009 will likely end. Ok so consider the last several cycles, have you ever experienced a market crash, which was expected by the masses? That is because markets just don’t work that way.
As Dr. Hernan Douglas, former Luksic Scholar at Harvard University, former Senior Economist at the IMF and former Deputy Research Administrator at the World Bank, noted regarding those utilizing “fundamental” analysis to identify when a market swoon will occur:
Historical data says that they cannot succeed; financial markets never collapse when things look bad. Actually the contrary is true. Before contractions begin, macroeconomic flows always look fine. That is why the vast majority of economists always proclaim the economy to be in excellent health just before it swoons. Despite these failures, indeed despite repeating almost precisely those failures, economists continue to pore over the same macroeconomic fundamentals for clues to the future. If the conventional macroeconomic approach is useless even in retrospect, if it cannot explain or understand an outcome when we know what it is, has it a prayer of doing so when the goal is assessing the future?
So we are still of the opinion that we likely have a number of years to still run to much higher levels in the S&P 500. In fact, here at FM Wealth Management we believe that there is potential for this market to even exceed the 4000 mark in early 2020 before this bull market comes to end. Remember, the market will still have to rally far enough to convince even the most die hard of bears that this bull market is unstoppable.
So that brings us to the point noted in the title to this article. You see, once this bull market convinces the masses of its invincibility, only then will we see the top in early to mid 2020. It is at that point when everyone is certain of the invincibility of this bull market, that it will set us up to be heading into a period of time which will likely be worse than what we experienced in 2008. In fact, it can rival the period of time marked by the Great Depression. Sorry for the dark warning but don’t shoot the messenger we are only interpreting the data.
So if you understand the context of the overall long-term market structure, the years between 2000 and 2009 actually represented a fourth wave sideways consolidation. That led to this fifth wave we are currently experiencing, which still likely has several more years to run. However, once this 5th wave does complete, we will likely enter into a fourth wave correction, which is one degree larger than the correction experienced between 2000 and 2009. In other words the correction that potentially will begin in the mid to late 2020 will likely be worse than one we experienced into 2009. In fact, the stock market can correct from levels exceeding 3500 back down to somewhere between 1000 and 1300 area. Moreover, that correction could last over a decade.
Aright that does not mean you should be donning tin foil hats, stocking up on water and dried food, and heading into your underground bunker just yet. We will remind you that knowledge is power, and if you have this knowledge of what potentially is coming, you can use the final years of this bull market to prepare for the largest bear market we have seen since the Great Depression.
While many analysts will continue to view our analysis methodology as something akin to hocus-pocus, We can assure you that it is well grounded in mathematics, and has been quite accurate for many years, which can be confirmed our long term clients and people who have followed us for years. The fact that we have over 400 money manager clients in the 9 years since we have been in business is a testament to how well we have prepared our clients for the machinations we have seen in the overall markets we follow.
Ben Franklin stated: “By failing to prepare, you are preparing to fail.”
The FM Wealth Management Wave model suggests that this bull market can still last into early 2020 (though will likely see a 20-30% correction at the beginning of 2019 before we begin the final rally to end the bull market). However, once that last rally ends, you will need to be prepared for something that may seriously rival the Great Depression.
While everyone was getting very bullish in late 2015, FM Wealth Management warned that we were setting up for a S&P 500 (SPX) to drop from the 2100 region back down to the 1800 region. We also warned that investors should not get too bearish, since that pullback would set up the market for a multi-year rally to over 2600 in the SPX.
Some may recall that in early 2016, most analysis you were likely reading was preparing you for the inevitable market crash that everyone seemed to be certain was just around the corner. At the Same time the FM Wealth Management Wave analysis put the market in appropriate context, and that analysis showed that we likely had several more years to come before the bull market which began in 2009 will likely end. Ok so consider the last several cycles, have you ever experienced a market crash, which was expected by the masses? That is because markets just don’t work that way.
As Dr. Hernan Douglas, former Luksic Scholar at Harvard University, former Senior Economist at the IMF and former Deputy Research Administrator at the World Bank, noted regarding those utilizing “fundamental” analysis to identify when a market swoon will occur:
Historical data says that they cannot succeed; financial markets never collapse when things look bad. Actually the contrary is true. Before contractions begin, macroeconomic flows always look fine. That is why the vast majority of economists always proclaim the economy to be in excellent health just before it swoons. Despite these failures, indeed despite repeating almost precisely those failures, economists continue to pore over the same macroeconomic fundamentals for clues to the future. If the conventional macroeconomic approach is useless even in retrospect, if it cannot explain or understand an outcome when we know what it is, has it a prayer of doing so when the goal is assessing the future?
So we are still of the opinion that we likely have a number of years to still run to much higher levels in the S&P 500. In fact, here at FM Wealth Management we believe that there is potential for this market to even exceed the 4000 mark in early 2020 before this bull market comes to end. Remember, the market will still have to rally far enough to convince even the most die hard of bears that this bull market is unstoppable.
So that brings us to the point noted in the title to this article. You see, once this bull market convinces the masses of its invincibility, only then will we see the top in early to mid 2020. It is at that point when everyone is certain of the invincibility of this bull market, that it will set us up to be heading into a period of time which will likely be worse than what we experienced in 2008. In fact, it can rival the period of time marked by the Great Depression. Sorry for the dark warning but don’t shoot the messenger we are only interpreting the data.
So if you understand the context of the overall long-term market structure, the years between 2000 and 2009 actually represented a fourth wave sideways consolidation. That led to this fifth wave we are currently experiencing, which still likely has several more years to run. However, once this 5th wave does complete, we will likely enter into a fourth wave correction, which is one degree larger than the correction experienced between 2000 and 2009. In other words the correction that potentially will begin in the mid to late 2020 will likely be worse than one we experienced into 2009. In fact, the stock market can correct from levels exceeding 3500 back down to somewhere between 1000 and 1300 area. Moreover, that correction could last over a decade.
Aright that does not mean you should be donning tin foil hats, stocking up on water and dried food, and heading into your underground bunker just yet. We will remind you that knowledge is power, and if you have this knowledge of what potentially is coming, you can use the final years of this bull market to prepare for the largest bear market we have seen since the Great Depression.
While many analysts will continue to view our analysis methodology as something akin to hocus-pocus, We can assure you that it is well grounded in mathematics, and has been quite accurate for many years, which can be confirmed our long term clients and people who have followed us for years. The fact that we have over 400 money manager clients in the 9 years since we have been in business is a testament to how well we have prepared our clients for the machinations we have seen in the overall markets we follow.
Ben Franklin stated: “By failing to prepare, you are preparing to fail.”
The FM Wealth Management Wave model suggests that this bull market can still last into early 2020 (though will likely see a 20-30% correction at the beginning of 2019 before we begin the final rally to end the bull market). However, once that last rally ends, you will need to be prepared for something that may seriously rival the Great Depression.
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