And while it’s understandable to feel shell shocked following the gyrations of August and late September, all this recent market volatility has reminded me of a very important lesson I learned during the 2008 crisis:
Above All Else, Protect Capital.
One of the reasons I created The Sevens Report over three years ago was to make sure advisors and investors have an experienced macro analyst “watching their back” and making sure they are made aware of risks to the market and to client portfolios, so they can achieve that primary goal of protecting client capital while still having time to grow their books of business.
To protect capital in today’s macro dominated markets, you have to identify and understand what the real risks to the market are, and not rely on the financial media, which seems to be getting more sensationalist every week.
Despite the media cheerleading yesterday:
- Wednesday’s rally was mostly short covering and end of quarter window dressing.
- It was not something that makes us more optimistic the bottom is “In.”
We deliver the paid version of The Sevens Report to subscribers every day at 7 AM EST because in today’s macro dominated global economy, it is essential to have a clear, concise coverage of all markets that cuts through the noise and tells you what you need to know about risks and opportunities in stocks, bonds, currency and commodities.
Specifically, we take complex macro-economic concepts like Chinese economic developments, FOMC Statements, Manufacturing PMIs, Japanese and European QE outlooks and tell you:
1) What you need to know,
2) What will move markets, and
3) What will make those events positive or negative for stocks and other asset classes: Commodities, Currencies, and Bonds.
Every morning at 7AM we deliver this information, so you can show your clients you’re on top of the markets with a plan to outperform, regardless of the environment.
The Report gives you the information you need to understand markets while still having time to focus on building stronger client relationships.
Case in point, earlier this week we identified the 4 headwinds that must be eliminated if stocks are going to finish the year positive, and alerted our paid subscribers to three more potential headwinds that are not priced into stocks right now, but that represent a possible risk to client portfolios.
Again, these headwinds are NOT priced into stocks at these levels, and represent an additional risk to portfolios outside of the current headwinds we already know about: 1) Chinese economic growth worries and 2) Fed uncertainty.
And, our subscriber base, which includes hundreds of wire house and independent advisors, asset management professionals, hedge funds and institutional trading desks, had these headwinds identified for them earlier this week.
We all know that the multi-year bull market is at a tipping point, one that will be resolved in Q4, and that process will continue tomorrow with the jobs report.
Despite the Fed like being on “hold” until December, the jobs report is still going to move markets, as it’s directly related to one of the three headwinds that are NOT priced into stocks at these levels.
Understanding, in real time, what the economic data means for the market is vitally important as we enter Q4, because if the US economy starts to show signs of slowing, then the lows of August will NOT hold.
As a courtesy, we provided an excerpt from today’s Sevens Report that contains our standard “Jobs Report Preview” that we provide to subscribers every month during jobs week so they are fully prepared for the market reaction to any potential data print.
Jobs Report Preview
The importance of this month’s jobs report has been reduced following the September FOMC statement, where the FOMC shockingly “moved the goal posts” and made equity market volatility and the international growth outlook primary factors that will decide whether rates increase later this year.
That said, this is still an important report for multiple reasons, but the fact is this will have to be a “blow out” number to put an October hike on the table.
Finally, keep in mind that a “Too Hot” or hawkish number is now positive for stocks and risk assets as it increases the chances of a rate hike in December. Meanwhile a “Too Cold” or dovish number will be negative for stocks.
“Too Hot” Scenario (What it Takes to Hike in October)
· > 300k Job Adds. It’ll take a huge number to put October back on the table, and over 300k jobs added will definitely get the FOMC’s attention.
· < 5.0% Unemployment Rate, ≤ 10.0% U-6 Unemployment Rate. In the March statement the Fed lowered “NAIRU” to 5.0% and below, but last month said it could stomach a temporary overshoot. So, it’ll take an unemployment rate with a “4” handle on it to get the FOMC to consider an October hike.
· > 2.5% yoy wage increase. Wage inflation picked up a bit in October, but again the FOMC said it’ll tolerate an overshoot near term, so it’ll take another spike in wages to get the Fed to consider moving in October.
“Just Right” Scenario (No Oct. Hike But Dec. Probable)
· 150k—300k Job Adds, 5.0%-5.3% Unemployment Rate, 2.1% – 2.3% YOY wage increase. The range for this number to be “just right” or “Goldilocks” is pretty wide, and anything in this range likely means no hike in October but still a decent probability of a hike in December.
“Too Cold” Scenario (No Hike in 2015)
· < 150k Job Adds, ≤ 2.1% yoy wage increase. This will not be a good number because it’ll imply the US economy may be losing momentum, and it will reduce the chances of a December hike, both of which will be decidedly negative for stocks.
The stock market is starting the 4th Quarter testing support at the August lows (1867), and that precarious technical set up means that it’s more important than ever to understand, in real time, what global economic data and the Fed communications mean for markets.
During this 4th quarter, if you’re market analysis is delayed or not comprehensible (meaning it’s coming from the firms’ PhD economist) you may miss the chance to protect client portfolios or seize opportunities.
We are committed to making sure our subscribers have the information they need, each trading day, to successfully navigate the coming quarter. That starts tomorrow with the jobs report.
We believe that even in this difficult environment advisors shouldn’t have to sacrifice time with clients and prospects just to stay up on the markets. Especially during this 4th quarter, we will make sure our subscribers have the information they need to stay up on the markets, so they have more time to continue to build their business.
We adamantly believe we offer the best value in the paid research market, and we have over a 90% retention rate to prove it. Let us help you this 4th quarter.
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.
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In three years of doing this the absolute best feedback I’ve ever received was when a client (an FA from a bulge bracket firm based in Florida) called me late last year and said our Report helped him land a 25 Million dollar client!
But, while obviously not as monetarily impressive, we continue to get strong feedback that our report is: Providing value, Helping our clients outperform markets, and Helping them build their business:
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Finally, everything in business is a trade-off between capital and returns.
Editor of The 7:00’s Report