January 2016 Flash Update

Stock market performance during the first week of the year has historically been a good indicator of market direction for the year ahead. Strong starts have historically indicated a better than normal outcome. Conversely, weak beginnings are generally ominous (excluding years when the Fed cuts short term rates). One thing is certain, 2016 will not bring big cuts in short term rates. With that perspective, it is surprising that the biggest percentage drop in both the S&P 500 and the Dow Jones Industrials in history is not generating investor panic. About the only survivors where high quality long term bonds like Treasuries along with gold and gold mining stocks.

Certainly investor anxiety has increased. This week, our proprietary gauge of investor sentiment dipped to levels consistent with a substantial short covering rally. I was surprised it didn’t happen on Friday. Although the likelihood of a rally has increased, it is not unusual for our index (as well as stock prices) to fall further and remain depressed for weeks to come. Therefore we look for other signs to distinguish between investor anxiety and panic. When sentiment reaches extremes it becomes pervasive. Headlines in the financial press then become a great contrary indicator of future market direction. When I opened my weekend edition of Barron’s this is what I found.

Cover: BEAR SCARE ...Why the selling might almost be over

Columns:

A Currency Affair

Buckle Up but Don’t Bail Out

After a Harrowing Start, Stocks Could Take a Breather

A Perilous Outlook for Asia in 2016

Hanesbrands Has 30% Upside

Threat to the US From China’s Woes Overblown

Winners in the Internet of Things

UGG Makers Shares Could Soon Be Back in Style

Besting a Bad Market

Still Bullish on Emerging Markets

The Energy Sectors Best Payout Bets

Making Bipartisan Policy

Quarterly Mutual Funds: Tackling the Challenges of a Choppy Market

Only one of the headlines, A Perilous Outlook for Asia in 2016 is unambiguously bearish, but even that headline was not focused on US markets. The overall tone is best described as “cautiously optimistic.” Unlike last August and early 2009 there is no contrary indicator of panic here that leads us to expect more than a short lived rally.

A bear market has already engulfed the Dow Jones Transportation Average, over half the stocks in the S&P 500, and average stock in the S&P 1500. That bear trend is now bursting the 2013-2015 bubble in the S&P 500 and Dow. This should be no surprise, although few investors are even aware of the bear market in the lesser indices. A year over year drop of 14% in reported earnings for the S&P 500 at the end of the third quarter combined with interest rates that are rising, not falling, could lead to no other outcome. The only question is, what took it so long?

Clyde Kendzierski Chief Investment Officer

Financial Solutions Group LLC 6700 E Pacific Coast Highway, Suite 291 Long Beach, CA 90803

562.430.2223 www.financial-solutions-group.com [email protected]

Unless otherwise indicated, investment opinions expressed in this newsletter are based on the analysis of Clyde Kendzierski, Managing Director and Chief Investment Officer of Financial Solutions Group LLC, an investment adviser registered with the California Department of Corporations. The opinions expressed in this newsletter may change without notice due to volatile market conditions. This commentary may contain forward-looking statements and FSG offers no guarantees as to the accuracy of these statements. The information and statistical data contained herein have been obtained from sources believed to be reliable but in no way are guaranteed by FSG as to accuracy or completeness. FSG does not offer any guarantee or warranty of any kind with regard to the information contained herein. FSG and the author believe the information in this commentary to be accurate and reliable, however, inaccuracies may occur.

Investors should consider the charges, risks, expenses, and their personal investment objectives before investing. Please see FSG’s ADV Part 2A containing this and other information. Read it carefully before you invest.

Past performance is a poor indicator of specific future returns. It, however, may be useful in your evaluation of how FSG performs in different market environments. Investors have the ability to achieve results similar to benchmark indices by investing in an index fund or Index-tracking ETF, typically with lower fees.

Past performance of any security is not a guarantee of future performance. There is no guarantee that any investment strategy will work under all market conditions.

There is no guarantee that the investments mentioned in this commentary will be in each client's portfolio.

This material is intended only for clients and prospective clients of the FSG.It has been prepared solely for informational purposes and is not an offer to buy or sell or a solicitation of any offer to buy or sell any security or other financial instrument, or to participate in any trading strategy.

S&P 500 Index is an unmanaged, market value-weighted index of 500 stocks generally representative of the broad stock market.

This material does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The strategies and/or investments discussed in this material may not be suitable for all investors. No mention of any security or strategy should be taken as personalized investment advice or a specific buy or sell recommendation. Please contact FSG to discuss your specific financial situation and suitability.

It is always the intention of FSG to minimize any negative effect on clients. Our success in that effort, however, is subject to unanticipated market conditions. Consequently, past performance does not guarantee future returns.

 

Financial Solutions Group LLC 6700 E Pacific Coast Highway, Suite 291 Long Beach, CA 90803

562.430.2223 www.financial-solutions-group.com [email protected]

 

Unless otherwise indicated, investment opinions expressed in this newsletter are based on the analysis of Clyde Kendzierski, Managing Director and Chief Investment Officer of Financial Solutions Group LLC, an investment adviser registered with the California Department of Corporations. The opinions expressed in this newsletter may change without notice due to volatile market conditions. This commentary may contain forward-looking statements and FSG offers no guarantees as to the accuracy of these statements. The information and statistical data contained herein have been obtained from sources believed to be reliable but in no way are guaranteed by FSG as to accuracy or completeness. FSG does not offer any guarantee or warranty of any kind with regard to the information contained herein. FSG and the author believe the information in this commentary to be accurate and reliable, however, inaccuracies may occur.

Investors should consider the charges, risks, expenses, and their personal investment objectives before investing. Please see FSG’s ADV Part 2A containing this and other information. Read it carefully before you invest.

Past performance is a poor indicator of specific future returns. It, however, may be useful in your evaluation of how FSG performs in different market environments. Investors have the ability to achieve results similar to benchmark indices by investing in an index fund or Index-tracking ETF, typically with lower fees.

Past performance of any security is not a guarantee of future performance. There is no guarantee that any investment strategy will work under all market conditions.

There is no guarantee that the investments mentioned in this commentary will be in each client's portfolio.

This material is intended only for clients and prospective clients of the FSG.It has been prepared solely for informational purposes and is not an offer to buy or sell or a solicitation of any offer to buy or sell any security or other financial instrument, or to participate in any trading strategy.

S&P 500 Index is an unmanaged, market value-weighted index of 500 stocks generally representative of the broad stock market.

This material does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The strategies and/or investments discussed in this material may not be suitable for all investors. No mention of any security or strategy should be taken as personalized investment advice or a specific buy or sell recommendation. Please contact FSG to discuss your specific financial situation and suitability.

It is always the intention of FSG to minimize any negative effect on clients. Our success in that effort, however, is subject to unanticipated market conditions. Consequently, past performance does not guarantee future returns

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