No surprise that stocks took a break this week. Profit-taking from the election rally has been the main theme over the last few days for investors and could continue through the New Year.

As traders desert their desks for holiday shopping (present company included), volumes have petered out as world markets experience a consolidation. Remember readers that markets can correct in two ways: a sharp sell-off or this kind of sideways movement.

Frankly, give me a good old consolidation anytime. They may be boring, but sharp declines, especially around the holidays, makes for unhappy investors and can ruin the office Christmas party. I am actually relieved that we have had the Santa rally a little earlier this year.

Over the last two weeks I warned investors not to chase the Trump rally. Greed has given way to common sense and another week or two of consolidation might relieve a large part of what I see as "overbought" conditions.

This week, U.S. investors did receive some good news. The economy actually grew by 3.5 percent, which was the fastest rate of growth in over two years. The third-quarter results were fueled by strong consumer spending, higher food exports, and a revival of investment spending.

Of course, the Obama Administration will get no credit for the facts that unemployment is at historical low levels, GDP growth is finally revving up and wage growth is starting to climb.

The new administration will take credit for this revival in investor's minds. The same thing happened in reverse when President Obama took office eight years ago.

George W. Bush left the Democrats with an economy in shambles, a financial crisis that rivaled the crash of 1929, and ultimately an unemployment rate north of 10 percent. Naturally, investors blamed the new guy for the old guy's mistakes. Well, nothing is fair in politics.

The reason I am bringing this up, however, is to ask the question -- how much of the "Trump rally"  should be attributed to the Donald's election and how much is simply a reflection of a turn in the economy that has been going on for the past few months?

Why, you might ask, is this important? Most pundits are crediting last month's market gains to Trump's elections. What if the gains were simply a celebration of a new-found strength in the nation's economy? It would make the levels in the stock market reasonable, especially if investors expect more good news in the future.

Of course, the future is a lot less predictable now than it has been in the past. We still have no idea how many of the president-elect's initiatives are going to bear fruit. In the meantime, the markets are being supported by the existing strength in the economy and a new-found "animal spirit" based on Trump's campaign promises.

But there are a lot of questions in my mind concerning some of those promises. Let's take the tax cuts that just about everyone is convinced are just around the corner. Tax cuts to investors, by definition are positive. But will corporations benefit from a 15 percent tax rate or a 20 percent rate? The difference is substantial, and exactly what will the fine print mean for various sectors?

What sectors will gain the most or will every corporation benefit equally? Will capital gains taxes be cut as well, and if so, by how much? Throw questions about the estate tax, individual income taxes and changes in both corporate and individual tax deductions (like mortgage deductions) into the mix and you may have some unexpected surprises. No one knows.

Then there is all this talk about a huge infrastructure program. Metals and mining stocks as well as cement, copper, steel, and God knows what else have doubled or tripled in the expectation that all these materials companies will benefit from trillions of dollars in government spending. Re-building the nation's highways, hospitals, schools, bridges, airports, electrical grids, etc., were certainly part of Trump's campaign promises, but the timing and method of spending is open to question.

Trump has said in a post-election New York Times interview that infrastructure spending won't be a core part of the first few years of his administration. He also admitted that a New Deal-type program would not sit well with the traditional Republican ethos. That's not to say he won't fulfill his commitment, but it might be so far in the future than the present prices of material stocks justify.

What we do know is that the new president will be unorthodox in his approach to many of the nation's problems. He may very well cut corporate tax rates and at the same time take steps to eliminate corporate cronyism. He may get his infrastructure plan, but convince the private sector to foot the bill, instead of government. He has already showed his penchant for deal making via Twitter.

The point is that the best may lie ahead of us, but attempting to discount the future without the facts is dangerous at best. Fortunately, the growing strength of our economy has less to do with Trump, I believe, and more to do with the policies of the past, especially those of the Federal Reserve Bank. To me, the future looks promising under a new set of Trump initiatives and should be reflected in higher levels in the stock market going forward. I would use any pullbacks in the months ahead as buying opportunities.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

The rally continued in the stock market as investors abandoned bonds and bought stocks hand over fist. Many think the best is yet to come, since the traditional end-of-year Santa Claus rally is still ahead of us.

However, between now and then, we have the Federal Open Market Committee meeting next Wednesday. The bond market is betting on the following: that the Fed Funds rate is raised by one quarter of one percent, and the FOMC meeting minutes indicate that the Fed may raise rates two more times in 2017. Anything more than that would be hawkish and most likely cause the stock market to correct. That happened last year and cut short the Santa rally.

If the Fed's actions, on the other hand, are in-line with expectations (or even more dovish) the chances are stocks will continue to rally and so will bonds. Although most investors focus almost entirely on the stock market, which has soared since the election, few realize the devastation that is occurring in the bond market.

I have continually warned bond holders that someday they would face Armageddon. It seems to be happening now. During the past three weeks, investors sold over $2.7 trillion worth of bonds. Almost a like amount of money has found its way into the stock market. But I suspect bonds are due for a relief rally fairly soon.

Aside from the upcoming Fed event, one must also look at the nature of the Santa Claus rally. Usually, investors sell stocks during the first two weeks of the month. It's called "tax-loss selling" where investors establish capital losses to offset gains that they may have booked during the year. This usually depresses stock prices across the board. After the selling abates, investors then buy back stocks during the last two weeks and into January of the following year.

This year, however, that has not occurred and with a good reason. Investors expect that under the Trump administration, the capital gains tax will be lowered giving them an incentive to hold on to their stocks until 2017. Given that behavior, stocks might be getting bid up now only to see disappointment in the last two weeks of the year.

The S&P 500 Index has already exceeded my target for the year (2,240). It is now 10 points higher at 2,250, which is a nice round number. There are some traders who believe that we can climb even higher. Some say the Dow could reach 20,000 (another round number) before the end of the year. Certainly, since we are only a few hundred points from that mark, there is nothing stopping investors from chasing stocks higher.

To me that's pure gravy.  I had been expecting a mid-single digit return for the market and year-to-date we have gained a little over 6 percent. Close enough for government work. So what to do between now and the end of the year?

Sit tight and enjoy the fireworks. In the very short term anything can happen.  If we don't have a pullback in December, chances are we will have one in January, but not to worry. I expect that the stocks will continue to have an upward bias at least through the first 100 days of Trump's reign.
 

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

What a week of volatility! The Dow was up or down 100 points or more every day while the other averages were equally as volatile. Brace yourself, because October should be just as crazy.

Pick your poison: the presidential debate, fears of a global banking crisis, a spike in oil — all of them provided a field day for short-term traders. Of course to profit, one must have known who would win the debate, that OPEC would come to a tentative agreement to cut production, and that the largest bank in Germany would experience even more financial difficulties.

I wrote last week that politics would impact the markets this month. The first presidential debate saw the market drop double-digits on Monday, only to recoup its losses on Tuesday, as the market determined that Clinton had won the debate. How they determined that was less important than the money that was made believing it.

OPEC also met this week in Geneva. The betting was that the members would not (or could not) come to an agreement. Traders expected that the oil price would crater once the meeting ended in disappointment — wrong! Oil shot up in price over 5 percent as OPEC members agreed to work out a production cut among its membership before their next meeting in November.

The news caught quite a few day traders and proprietary trading desks of big financial concerns flat-footed. As the smoke cleared, stocks rose even higher following the gains in oil.

Just a few hours later, Bloomberg News reported that several nervous hedge funds were pulling their money out of Deutsche Bank, Europe's largest financial institution. The bank's stock price has been dropping steadily, (down over 50 percent) on concerns that Europe's negative interest rates were decimating the bank's business.

Suddenly, memories of the collapse of Lehman Brothers, which precipitated the 2008 Financial Crisis, roiled the markets. All three U.S. indexes dropped in a panic led by financial stocks.

By Friday, some common sense returned to the markets. The economic and subsequent financial crisis of 2010-2013 shook Europe to its core. In response, the EU and the ECB established a series of safe guards among its banks to prevent a repeat of this kind of crisis.

As a result, even if Germany's largest lender is truly in dire straits, there are certain financial requirements that every European bank must adhere to. In this case, Deutsche bank has about $264 billion in liquidity reserves. The bank also has enough liquid reserves to cover 120 percent of the bank’s obligations for the next 30 days, no matter how severe the stress.

There have also been wild rumors of a bank bailout, plus a half-dozen more stories that cannot be substantiated. They do, however, make for some lucrative trading opportunities by high frequency traders. Don't get sucked into this drama.

My own opinion is that financial stocks around the world were already selling at bargain-basement valuations. This scare makes them even more attractive, if you are willing to hold them long enough. Remember, too, it is also the last week of the month and the last day of the quarter, when a lot of funny business usually occurs (it's called window-dressing).

October is upon us and the next election debate is on Oct. 9, when the vice presidential candidates meet. Batten down the hatches and prepare for the worst. That way, when things go better than expected, you will be pleasantly surprised. As for me, I will be temporarily out of commission for the next few weeks. I am getting a left-knee replacement, but should be back in action before the election. In the meantime, do nothing until you hear from me.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

As more Baby Boomers reach retirement age, few elderly investors are willing to discuss a growing risk to their portfolio. The onset of diminished mental capacity can cause huge losses in your life savings. Many only realize the problem in hindsight. Don't let that happen to you.

The facts are concerning. For example, one in nine people, age 65 or older, suffer from some form of dementia. That skyrockets to one in two people over the age of 85. What's worse, there are at least 18 different diseases that bring on dementia. Alzheimer's disease is only the most prevalent of causes. No one can predict who will get this disease, but we do know that the older we get the higher the risk.

If you have been reading my columns on estate planning, you know by now that a visit to an estate planning attorney is in order.  It is true that most investors with significant assets have already made wills, set up trusts and in other ways made plans to protect their money after death. In many cases, they have also set up a power of attorney to manage their affairs in the event of illness or when they can no longer manage their money themselves.

The problem with all of the above is that none of it safeguards you against an early onset of dementia. Only you can detect it, but even then, your mind can be telling you something different and usually does. It is a serious problem, since one out of seven us have it and may not know it. For investors, especially self-directed investors, this can result in disastrous investment decisions.

But what about your loved ones, won't they know? Unfortunately, unless you have actually lived through this process with a relative or friend, chances are they won't recognize what is occurring unless you tell them. I have had clients who have managed to conceal how poorly they are functioning from those they live with while continuing to make increasingly poor investment decisions as their brains atrophy.

My experiences with my own mother have taught me just how insidious this process can be. Our family assumed that dementia could be identified by the amount of things my Mom forgot, but we were wrong. There are many ways dementia can manifest itself and loss of memory is only one of them. In vascular dementia, for example, where the victim experiences a series of micro-strokes, other more important issues start to impact the brain. Loss of judgment, impulse control and emotional imbalance are several other conditions that can crop up even before memory loss.

All of the above can have a devastating impact on your portfolio. In some cases, an investor with early onset dementia can experience excessive fear or rage. Although prudent all their life, some investors will begin to take on excessive risk with their portfolios. Others will panic at the first down period in the markets and sell everything. Some lose their hard-won skepticism and will trust perfect strangers with easy-money con games.

Unfortunately, most loved ones realize that something is wrong only after the fact. It is far easier to suspect dementia when someone cannot find their way home. But it is far more difficult to identify within the financial world, especially if you have been making investment decisions on your own for many years.

How can you protect yourself from this risk? First, monitor your own investment behavior. If you detect that there have been recent shifts (either more greed or fear) in how you approach the markets - be on guard. Make sure you talk to your loved ones concerning these changes and ask them to keep an eye on your behavior. If they admit that they do see a change, don't get angry, get help. Go to your doctor and admit your fears. Better to lose a little pride than half of your life-savings.

On a different note, I will be missing in action over the next few weeks, getting my left knee replaced. Look for me again in November.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

Investors have been waiting all year for that elusive interest rate hike promised by our central bank. September proved to be another false start. Once again, markets rallied on the news, the dollar fell, and investors were happy. So what's new?

As we have written so many times in the past, investors and markets are fixated on a Fed rate hike. Now everyone's attention is on December. Janet Yellen, the Fed chieftain, indicated that she could see at least one rate hike this year — if the data warrants it. The problem is the economic numbers are, at best, inconclusive.

Even the central bank, in this last go-around at the FOMC, lowered its forecast for the future, long-term, growth rate of the U.S. economy. Back in 2011, it forecast a 2.5 percent growth rate. Then lowered it to 2 percent in June and now sees no more than 1.8 percent. That sure doesn't sound like we are going in the right direction.

Furthermore, the Fed's inflation target, which is slightly above 2 percent, has been stuck below that number for years and it does not appear that it will climb anytime soon. You might ask if inflation is contained and economic growth is slowing, why in the world would the Fed raise rates.

The only bright stop seems to be the employment gains we have experienced in the last few years. Even in that area, there has been some dissatisfaction with the quality of jobs the economy has been generating. The number of workers who are either underemployed or have given up looking for a job altogether skew the statistics. The only reason I can see for the Fed to raise rates is to answer Wall Street's demand for a return to "normalization."

That's financial speak for getting the Fed out of the financial markets. Free marketers want the Fed to return to the days when they were not trying to support stocks, bonds, and even commodities as well as overseas markets. I truly doubt the Fed was ever that hands-off when it came to control, but they have been more heavy-handed in their approach to the markets since 2009 and with good cause.

As I have written many times before, the unprecedented lack of any kind of fiscal stimulus out of Washington has resulted in the failure of the U.S. economy to gain any momentum. The Fed knows that and the market knows that. But we all choose to blame the Fed instead.

In the meantime, we are dancing to the same old song. Fed members say "maybe" and the market swoons, followed by no rate cut and the market rallies. Equities remain the only game in town. It's simple: the S&P 500 Index is yielding 3 percent while the ten-year U.S. Treasury note is giving you less than 2 percent. Investors will go where they get the most return.

It also means that volatility will continue. It is why I am advising you to hang in there and ignore the ups and downs. A week ago (before the Fed decision), the markets were prepared for further downside. Today, we are once again approaching the highs of the year — until we hear from the next hawkish Fed member. But remember, a rate hike will be data dependent. It doesn't matter what one or another Fed member might think, so try and ignore the chatter.

Monday night we will also be treated to the first presidential debate. I am sure that will impact the markets, unless the event is a washout for both sides. Since we are approaching the final lap in that race, the polls will be monitored daily. If Clinton's lead over Trump narrows as a result, expect a tantrum from the market. And so it goes.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.