Summing Up The Week
Quality earnings, an improved GDP, better private payrolls, an interest rate cut, a great jobs report, and China even looks like it may be (again) planning to deal with the U.S. – it’s been a heck of a week!
However, with so many analysts claiming we’re due for a recession in 2020 and the always-looming possibility of China backing out, what do we do now?
Let’s take a look at the news that moved the markets this week…
Just Don’t Say the “R” Word…
The week kicked off with a great deal of positive action as companies’ positive earnings reports and lack of CEOs using “recession” in conference calls made analysts think record highs were in store for the markets, reported CNBC.
CNBC pointed to comments made in the conference calls of banks, credit card companies, housing, and even the company Tractor Supply (TSCO) as reason to believe that the U.S. consumer remains strong and will prop up the economy.
US GDP Rose Better-Than-Expected at 1.9%
The United States Gross Domestic Product (GDP) rose 1.9% in the third quarter beating economists expecting only 1.6%, reported CNBC on Wednesday. The Commerce Department pointed to continued consumer spending as well as government expenditures as the reasons behind the data beat.
While those numbers indicate a relatively stable economy – positive news – some analysts on the street were worried that the Federal Reserve Bank might not cut interest rates later in the day as it was expected to.
Private Payrolls Beat Expectations, Tempered by September
Private payrolls increased by 125,000 in October which beat Wall Street expectations, reported CNBC on Wednesday. While such a number would typically indicate economic growth, September payrolls were also revised down by 42,000 from 135,000 to 93,000 representing a -31.11% reduction.
“Job growth has throttled way back over the past year,” said Mark Zandi, chief economist at ADP/Moody’s Analytics. “The job slowdown is most pronounced at manufacturers and small companies. If hiring weakens any further, unemployment will begin to rise.”
Fed Cuts Interest Rate, Indicates Pause But No Hikes
The Federal Reserve Bank cut the interest rate by 25 basis points (0.25%) during its Wednesday meeting as the markets expected, however the Fed indicated it would pause any additional cuts while also reassuring that “really significant” inflation would be needed before a return to hiking, reported CNBC.
Fed Chairman Jerome Powell stated that the Federal Reserve officials “see the current stance of monetary policy as likely to remain appropriate.”
On Thursday, President Trump once again tweeted about Powell, claiming that “people are VERY disappointed in” the central bank’s chairman, reported CNBC. Trump believes the Fed needs to continuing lowering interest rates to zero or potentially lower to compete with Germany and other trade partners.
Trade Deal Signing Location Signs Off
Chile announced it would cancel any summits in the country thanks to anti-government protests, leading to much confusion during the week about where the U.S. and China would meet to sign phase one of the trade deal.
While the initial news came earlier in the week, the markets started to take a downturn following the Fed’s meeting on Wednesday. Without positive Fed news to look forward to (the Fed cut rates), analysts and investors turned their gaze to the Trade Deal which was still mired in confusion.
On Thursday, Trump tweeted that the “phase one” trade deal is 60% of the overall trade agreement and that a new signing location would be announced soon, reported CNBC. Many market analysts expressed skepticism that the Phase One deal truly represents the resolution of a majority of the issues the U.S. has with China’s trade practices.
Jobs Report Blows Away Estimates
The jobs report showed nonfarm payrolls rose by 128,000 in October and blew away economist estimating an increase of 75,000, reported CNBC.
In addition, this month’s release revised August up to 219,000 from 168,000 and September to 180,000 from 136,000. The unemployment rate increased 0.1% from 3.5% to 3.6% but remains near the lowest its been in 50 years.
As a result, the markets rose on the news during Friday trading.
On Again, Off Again, On Again? China Talks
On Friday, the Chinese Ministry of Commerce said that Vice Premier Liu He had a phone call with Robert Lighthizer and Steve Mnuchin that was “serious and constructive,” reported CNBC.
As has been the case throughout the entire trade negotiations, both sides have flip-flopped on what they say they’re willing to do and then what they’re actually willing to do.
The White House claimed the trade representatives “made progress in a variety of areas and are in the process of resolving outstanding issues,” however, these comments come after rumors were swirling that the Chinese were once again seeing no progress as recent as Thursday night.
Next Week’s Gameplan
I’ve been speaking with more and more people who believe that a recession is a “sure thing” and are going to cash. While Get Irked always thinks having at least 10% of a portfolio in cash is a good idea, it’s hard to know what to do from here.
Typically, I prefer to take the contrarian approach – if everyone thinks it’s a good time to get into the markets, I cut back. If everyone thinks the markets are a terrible place for money, I add to positions.
However, no matter which approach an investor wants to take, it’s important to do so in moderation. Never go all in or all out. Sure, leaving some money in the markets will sting if there’s a big downturn, however, you can’t capitalize on a surprise upside move unless you’re exposed.
Sure, not having all your money in the market will disappoint when the market pops significantly and miss out on profits, but at least you won’t see your gains annihilated by a sudden 20% sell off.
Plus, I like to take profits when I have them and add to my positions when they reach key levels (assuming it’s a market- or sector-wide sell-off and not a company-specific bad news piece taking me down).
Get Irked contributors are not professional advisers. Discussions of positions should not be taken as recommendations to buy or sell. All investments carry risk and all readers must accept their own risks. Get Irked recommends anyone interested in investing or trading any asset class consult with a professional investment adviser to determine if an investment idea is suitable to them and their investment goals.
Bitcoin Price (in USD)
Bitcoin Price Action
What a week for Bitcoin!
Shortly after last week’s Week in Review, Bitcoin shot up an additional 20% Friday afternoon for a total gain of more than +40% in about 15 hours and setting a new weekly and monthly high at $10,540.49.
Over the course of the next several days, Bitcoin’s price receded slowly with a few half-hearted attempts to reach the previous high, the highest of which only reached the low-to-mid $9900s.
Bitcoin has struggled to regain any bullish momentum over the past few days, however, that being said, the bears aren’t having any luck getting the price remotely close to its $7296.44 low from last week, either.
Over the course of last weekend, I slowly closed my position in Bitcoin using several stop loss orders to earn an average price of $9532.38 giving me a total gain of 11.32% over the course of about a month.
While far from a great return for a nimble day trader, I consider it a very satisfactory result for a long-term investor like myself looking for average annual gains of 7%. Annualized, my gains on this trade would be in excess of 135%+ in one year.
On Monday, Bitcoin started rolling over but appeared to find support at $9300 where I opened a new position at $9362.59 with a 1.05% allocation buy followed by an additional 0.52% buy on Wednesday when Bitcoin pulled back at $9067.19.
My current position is 1.57% of my desired allocation with a $9308.38 per-coin cost. For the moment, I’m back to sitting on my hands as I wait to see what Bitcoin’s next move is.
Here are my buy allocations and price targets from here:
1% @ $8676.10
1% @ $8343.26
2% @ $7487.58
2.75% @ $6626.35
3% @ $5586.21
3.5% @ $5031.48
9.75% @ $3816.60
16% @ $3017.78
17% @ $2608.66
18.5% @ $1877.79
23% @ $1417.36
As for sell targets, it’s a matter of seeing where the bulls take the price and setting stop losses to protect profits accordingly.
Die-hard crypto advocates will tell speculators that in lieu of trading Bitcoin and its cryptocurrency brethren, the preferred approach is to buy and hold – “HODL on and wait for the moon.”
Although, personally, I do see long-term potential in Bitcoin, I choose to capitalize on the space’s extreme volatility by trading in and out of positions and only HODLing my profits in cryptocurrency.
This approach allows me to build an allocation for the long-term while protecting my investing capital by pulling it back out whenever the trend starts to go against me. The volatility of the space provides a great deal of opportunity to capitalize on wild price swings while still building a permanent position.
DISCLAIMER: Anyone considering speculating in the crypto sector should only do so with funds they are prepared to lose completely. All interested individuals should consult a professional financial adviser to see if speculation is right for them. No Get Irked contributor is a financial professional of any kind.
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