House of Cards (Q4 Update)

Last night while I was finishing research on a list of seven catalysts to watch in Q4, I kept asking myself the question “Can the Market Finish Positive This Year?”

It’s not going to be easy.

Today is the last day of a terrible 3rd quarter, and as we start the 4th quarter I haven’t seen the market this tense since 2009, as sentiment, fundamentals and the charts are all telling us that stocks are at a multi-year tipping point, one that will be resolved positively or negatively sometime over the next three months.

And, frankly, our subscribers (advisors, RIAs, portfolio managers) and their clients are feeling that tension as well. 

I know that because over the past six weeks we’ve seen a big uptick in the number of subscribers asking permission to send The Sevens Report directly to their sophisticated, higher net worth clients.

In fact, a subscriber called yesterday and asked if he could send it to some of his best clients during this time of market turmoil, and our response was an enthusiastic “Yes!”

We all know that successful advisors grow their book and their business by connecting with high net worth clients, and to build trust with those clients you can’t just repeat company “perma-bull” strategies.

Especially during times like this, we want our FA subscribers to share our independent, concise market analysis because it is volatile markets like these where you can demonstrate to your clients that:

1. You aren’t just a passive participant in the market, and

2. You know the key catalysts to watch and have a plan to protect portfolios and seize opportunities. 

Doing that is how you get larger allocations and more referrals.

Case in point, last year, during a time of market volatility, a subscriber from Raymond James shared our Report with a prospect and it ultimately got him a 25 million dollar account!

This market is at a tipping point, and the chances of a breakdown or rally are about balanced, despite what the bears and bulls are saying.

So, advisors like the one I spoke to yesterday are faced with this dilemma:

How can he stay vigilant to a significant breakdown in stocks, while still keeping his clients in tactical strategies that can outperform and not miss buying this dip, if stocks start to recover.

Here’s how we solve that dilemma for our subscribers at The Sevens Report:

1. We watch all assets classes every single day,

2. We find strong risk/reward opportunities to tactically outperform

3. We, identify and monitor leading indicators across markets that will give us a “warning sign” for that ultimate big correction.

That’s what we do every day at 7 AM for subscribers to The Sevens Report, so that those advisors can make sure they have an independent analyst that communicates with them every day and quickly identifies for them the risks and opportunities for:

  • Stocks
  • Bonds
  • Currencies
  • Commodities, and
  • Interprets what economic data means for the market. 

And, that’s why this gentleman continues to renew his subscription – because he trusts us to

1) Watch markets while he is out getting more clients and

2) Give him talking point and tactical strategies that can help current clients outperform.

The Sevens Report is the daily market cheat sheet our paying subscribers use to keep up on markets, seize opportunities, avoid risks and get more assetsWe firmly believe we offer the best value in the independent research space.

Below we’ve included an excerpt from today’s paid edition of The Sevens Report that details the seven catalysts that will decide whether stocks finish 2015 positive or negative.

Seven Key Catalysts That Will Decide the Year (Sevens Report Excerpt)

The fourth quarter will begin tomorrow, with the S&P 500 down about 8%-9% in Q3 (depending on what happens today with window dressing).

Goldman said yesterday in a note that “Flat is the New Up,” and while I think that’s a bit pessimistic, a few things need to happen in Q4 for the S&P 500 to even get back to flat on the year.

To that point, we have identified seven key headwinds that must be reduced or eliminated if the S&P 500 is going to rebound in Q4.

  • Two headwinds have already been priced in via the declines in August.
  • Two more headwinds will be confronted during Q4 and are at least partially priced in.
  • Three headwinds are not at all priced in and represent a downside risk to stocks.

Headwinds Already Priced In: Fed Uncertainty & Slowing Chinese Growth.

The Fed is almost certainly on hold until December at the earliest, and while there may be “hawkish” rhetoric, at this point it’ll take an imminent rate hike to push stocks higher.

China remains a wild card although it’s likely that we should see some improvement in the Chinese economy this quarter because:

1) Authorities are basically in control of the stock market so there shouldn’t be any more violent crashes,

2) There was a lot of stimulus enacted in Q3 and that should begin to help the Chinese economy in Q4 and

3) More stimulus via additional interest rate cuts or reserve ratio cuts are coming in Q4.

The big unknown remains if there will be another yuan devaluation.  If China devalues the yuan again, that will be a significant catalyst, although we won’t know whether it’s a positive or negative one until it actually happens (our job will be to tell our paid subscribers whether it’s a positive or negative for client portfolios).

Potential Market InfluenceNone to Positive (as they are already priced in) if these headwinds are removed. 

Headwinds Partially Priced In:  Slowing Domestic Economic Growth, Lowered 2016 EPS Estimates.

So far, the US and most developed economies have withstood the emerging market turmoil, but the longer it goes on, combined with this stock market volatility, the greater the risk that US economic growth slows.

With earnings, it’s widely expected 2016 EPS estimates will come down, but the question is by how much. As we approach Q3 earnings season, anything greater than $125 for 2016 is neutral to positive, while anything below $125 will be a headwind.

Point being, economic data and Q3 earnings are going to be very important, and starting with the PMIs tomorrow and the Jobs Report Friday, advisors and investors need to have accurate, clear, daily analysis of economic data and Q3 earnings so they can help clients outperform by seizing opportunities, or getting more defensive via raising cash or hedging up.

Potential Market Influence: Positive or Negative. Some of these headwinds are at least partially priced into stocks here, so if they fail to materialize it will be a positive. Conversely, if they do materialize, then they are not adequately priced in. How these two issues are resolved will likely determine Q4 performance. 

Headwinds Not Priced In

We have identified three other potential negative catalysts that are not being widely followed right now, but that do represent critical risks to markets.

The three headwinds we’re watching are in the:

Commodities Market

Bond Market and

Political Arena

If you do not have an analyst watching these markets for you and sending you succinct updates on a daily basis, then you and your clients are at risk of getting blindsided by these potential headwinds.

We identified each of these catalysts in this morning’s Report for paid subscribers, and in doing so reassured them that as we enter a pivotal 4th quarter, we will be watching all corners of the market to make sure that

1) Nothing blind sides our paid subscribers, and

2) That if there are opportunities developing, we will alert them first. 

We’re especially focused on that this quarter because after the negative performance in Q3, advisors need to spend a lot more time reassuring and communicating with their clients, because the last thing we want to have happen is for people to pull their money out of the market following the worst quarter in years. 

Our paid subscribers know they can focus on their relationships and leave watching the market to us – and that will be more important than at any time in the last 7 years as we enter Q4.

Given the market volatility I am extending a limited time, special offer to new subscribers of our full, daily report that we call our “2 week grace period.” If you subscribe to The 7:00’s Report today, and after the first two weeks you are not completely satisfied, we will refund your first quarterly payment, in full, no questions asked.

Subscribe today and ensure you have the daily macro analysis you need to successfully navigate the 4th quarter.

Click this link to start your quarterly subscription for just $65/month. 

Make More Money, Save Time, Have More Knowledge

Our job is to provide you the timely, need-to-know, critical information that will demonstrate to your clients:

1) That you are on top of the markets, and

2) That you are in control of their financial situation.

Actual subscribers to The 7:00’s Report have told me that discussing the information contained in the Report with prospective clients has helped them land accounts as big as 25 Million Dollars!

2015 is going to continue to be a volatile year. Subscribe today and give yourself the market intelligence you need to help strengthen relationships with your current clients, and acquire new ones.

Subscriptions start at just $65 per month, billed quarterly, and with the option to cancel any time prior to the beginning of the next quarter, so there’s simply no reason why you shouldn’t subscribe to The 7:00’s Report right now.

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Best,
Tom

Tom Essaye,
Editor of The 7:00’s Report

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