Bull Bear Market Thoughts

Hey there, Dave Denniston with Centurion Financial Strategies. You've probably noticed if you've been watching your accounts lately that I've been rebalancing, you've seen a number of different trades and just kind of wanted to walk you through my thoughts and what's happening in the market and my thoughts on strategy going forward. Some of you I've told this to in client review meetings, but I figured I'd spread the word as some of you may be wondering what's happening with my accounts.

So today is the very end of July as I record this. It's July 26th, 2024, and about two weeks ago, I took some steps in our market timing type models to reduce risk. So overall, quick reminder, we have three different models altogether. One being a buy and hold and adjust where I might change some of the components but I'm not really trying to time the market at all. So usually I have those in non -qualified accounts where we don't want to realize capital gains very easily and stuff like that. Well, we're balanced from time to time. I may change some components from time to time but I'm kind of trying to hold a consistent mix the vast, vast, vast majority of the time. The other two models I have

One is a diversified portfolio has small caps, mid caps, large caps, some bonds and whatnot. And we have the last two years back in 2022, I made that model as well as our other model, the other timing model be more aggressive in stock. So we were conservative coming into 2022, took a step up and got more aggressive kind of a traditional allocation, like in a moderate portfolio, 60-40. And we didn't rebalance really in most cases for a while. Well, here we are now two years later, stocks have appreciated particularly the S &P 500. And so I now looked at it and now a lot of clients were like 65 -35 in a moderate kind of a mix. And so we've grown, which is great.

Here we are now about two years into a bull market. And I have no idea where the top is going to be. It might be another year from now or two years from now. But I said, you know what, we're at all time highs. The momentum is good. I would rather try and take some risk off the table. So we moved from a moderate type person from 65, 35 to 55.

So it took a 10 % reduction in stocks. So not going crazy, not trying to sell a whole bunch. What's been happening in the market, particularly in that diversified portfolio, is small caps and mid caps have, and the Dow Jones Industrial Average have all underperformed the S &P 500. Well here in the last month, they're starting to catch up. And as we go further and further in the year and this bull market gets longer

longer, there's a good chance in that timing model that I will sell more, particularly something like small cap stocks, which to me have some room to run still. But if this trend continues and they go up another five or 10%, I'm going to look to make things even more conservative to like a 50 -50 mix or something like that. Again, not getting out of stocks, but just trying to take us down a couple of notches so that when this thing does end,

we can take advantage of a 10%, 20 % correction or bear market that often comes after some good times. But in the meantime, we'll keep letting it go. In our other timing model, I haven't changed it yet because the momentum is currently still with us. We haven't completed out the year yet. As we get towards November, December historically,

Every year is different, but historically you have a Santa Claus rally, which the year ends up usually being kind of another old time high. Could that happen this year? It's possible. We have a lot of things going on, election, geopolitical worries. The economy seems to hit that soft landing everyone's talking about. I know on a personal basis, I'm seeing some stress in the economy. I'm hearing from people that a lot of jobs available, but they're not white collar type jobs that are high paying. They're lower paying stuff. And new college grads are having a hard time getting jobs. And those kinds of stresses, which to me is causing some issues for the consumer. For example, if you look at nonprofit giving, that's down. In many cases, you're seeing some nonprofits starting to lay off folks. So we're seeing some of these things out there. Does it mean we're going into a recession tomorrow? No.

But it's becoming more concerning for me and thus why I am making things more conservative in the short term and if things continue going the route that they are I'll make things even more conservative as we go further and further into a bull market. Keep in mind, the average bull market lasts 2.5-3 years.  We are one year and ten months into the current bull market, so almost two years in this could very well run another year.  Some bull markets last for 10 years, some 2 years and some last for a 1.5 years.  We don't know when it's going to end, but what I do know is the longer it gets, the more likely the correction and the next bear market will occur. We know it's going to happen at some point, it's just a matter of when. So my strategy for timing is to buy, hold and adjust. I'm not planning on changing anything here unless we have a bear market, in which case I might even look to get more conservative if it looks good enough. So those are my thoughts on strategy, where we're headed and what we're doing. If you want to dialogue on that, schedule a review to talk about it more.  I would love to chat with you.

Please feel free to send any questions and thoughts my way and we'll be in touch soon. Thanks.