Investment Climate July 2017: Are We Due for a Correction?

July 14, 2017

The second quarter of 2017 ended with little fanfare but was rife with speculation that the markets needed at least a correction and perhaps were teetering on a new bear market, to be brought on by recession.  The catalyst for this reemergence of pessimism was the May jobs report which showed a tepid 138,000 jobs created for that month.  Suddenly the headlines crowed about the Fed tightening credit just at the time the economy was weakening which was surely to be a harbinger of calamity.  It was “risk off” again and many of the best performing stocks in our portfolios over the last year were hit relatively hard and sharply.  

 


We have grown accustomed to this type of hyperbole from the punditry (not to mention those that either make their living on shorting, or trading, and require “volatility”), and have learned over decades of professional investing that we are best served when we follow closely the businesses in which we are invested and, generally, ignore the movement of the stock prices of those companies.  Obviously, the term “generally” is there for a reason.  There are moments when it is necessary to assess the value a company has attained and determine if it is time to sell.  For it is never appropriate to assume that great companies can continue to grow eternally, and the challenge of determining the time to “cut the cord” is truly the art of investment management.


Our general view is that the climate for investing is very positive, despite the constant groans of the crowd.  That said, corrections can come at any time, and we may well be due for something more “scary” to the tune of 5-10% down.  This would be healthy and a reason to position ourselves in some companies that we have on the “observation deck.”  As we have stated in recent commentaries, should the government be successful in trimming regulation (which has already begun) and reforming the tax code, we believe we would see a substantial revaluation of general stock prices to the upside.  Stay tuned.

 

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Taylor Frigon Capital Management LLC (“Taylor Frigon”), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Taylor Frigon.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Taylor Frigon is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice.  A copy of the Taylor Frigon’s current written disclosure Brochure discussing our advisory services and fees is available upon request. If you are a Taylor Frigon client, please remember to contact Taylor Frigon, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. 

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