Make Money… and Protect What We Have Made

Investing isn’t easy. Bull markets and bear markets are part of investing reality. Add to that the fact that investors are often influenced by the crowd, and you begin to understand why so many struggle.” Tim McMullan – Partner

 

We want to make money in bull markets, but more importantly, protect what we have made to avoid the devastation of a bear market.” Tim McFadden – Partner

Proven Insights

March 1, 2021

While the economic backdrop and liquidity factors are favorable, we are seeing several signs of excess that may need to be corrected…Given the run that we have seen following the election, we would not be surprised to see a little air taken out of the markets. 

January 4, 2021

Joe Biden has picked former Federal Reserve Chair Janet Yellen to be U.S. Treasury Secretary. As such, we believe it is important to remember that at her Fed confirmation hearing in 2013 she said monetary policy is most effective when the public understands what they are trying to do and how it plans to do it. Since the Fed believes that COVID is a natural disaster that has created a “demand shock,” the Fed is going to do their best to spur economic activity and create jobs regardless of who is in office.

The Fed’s goal is to promote as robust a recovery as possible, and anticipates that its unprecedented support will continue until the unemployment level moves below 4 percent, which they estimate will not be achieved until about 2023.

December 1, 2020

One of our guiding principles is that liquidity moves markets. Therefore, one of the few things that really matters is the Fed’s monetary policy.

According to the Federal Reserve’s playbook, stocks are an important “transition mechanism” used to generate a wealth effect that can increase aggregate demand, and this is the Fed’s position regardless of what party is in control of the White House.

September 2, 2020

The bottom line is this: The Fed is prepared to use its “full range of tools” to offset the adverse effects from COVID, and do so until the unemployment rate gets back to near pre-COVID levels. With the last reading of unemployment more than 10 percent, the Fed’s bond purchases are likely to continue for some time. What’s more, Fed Vice-Chairman Richard Clarida said monetary policy should “seek to offset [unemployment] throughout the business cycle and not just in downturns.”

If that is truly the Fed’s position, it is not that the stock market cannot go down, it is that it is unlikely to stay down as long as the market has confidence in the Fed to deliver.

June 2, 2020

The Fed increased the size of its balance sheet from roughly $4.2 trillion in mid-March to almost $7.1 trillion as of last week. A $2.9 trillion expansion – roughly 67 percent increase – in less than three months.

To put that increase in perspective, it took the Fed more than five years following the 2008 financial crisis to increase its balance sheet by $2.9 trillion.

April 1, 2020

After extreme panic‐type selling, a market bounce is generally the rule not the exception…

However, in the middle of difficulty lies opportunity. While the markets have experienced indiscriminate selling, a number of companies and industries seem to be well‐positioned to come out ahead. These are companies with products or services that are necessities. For example, a large cloud computing company has seen a 775 percent increase in traffic. The need for more capacity, more servers, more laptops to work remotely whether for school or business is causing a spike in business. Telemedicine, biotech, video conferencing, and medical diagnostics are but a few of the potential winners.

February 5, 2020

While the liquidity backdrop is favorable and the economy is growing, investors should brace for more volatility due to these ongoing developments and the proliferation of trading algorithms, which can cause wide swings in prices.

November 5, 2019

The other thing that the Fed is doing is increasing the size of their balance sheet as seen in the following chart. For the first time since 2014 the Fed’s balance sheet is intentionally growing.

At the end of October, the Fed’s balance sheet stood at $4.01 trillion, up 6.9 percent from the early September level. While the Fed points out that this “Balance Sheet Normalization” is required to address the need for additional reserves in the system and not technically “QE”(quantitative easing), it nonetheless is adding additional liquidity to the system, which is a positive.

May 2, 2019

DJIA 26,307.79

While it is obvious that the markets have had a pretty impressive run, we are seeing some indications of excess that could be a precursor to an increase in volatility. For example, a number of “hot” initial public offerings are taking place with companies that do not have earnings, some of which are more than doubling in price on the first day of trading.

In addition, reports show that large speculators were net short a record amount of futures contracts on volatility, betting that market volatility will remain low. While these two specific data points do not mean the market is going to roll-over, they do point to a rising element of euphoria and complacency.

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 February 1, 2018

DJIA 26,186.71

After going well over a year without even a 3 percent pullback, there are signs that have been present prior to episodes of market turbulence in the past.

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July 5, 2016

DJIA 17,840.62

If those earnings come in and the price/earnings ratio remains at current levels, the market could see a low double-digit gain from here.

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DJIA 16,899.32

The combination of our five key variables keeps our risk “Traffic Light” in “green light” territory and we expect higher prices.

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DJIA 16,351.38

We view this move as a correction in a bull market and recommend adding to positions on weakness.

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TJT Capital Group Newsroom

Investment News

In 2010, Investment News named TJT Capital Group one of the Top 50 Emerging Registered Investment Advisor firms in America.

Barron’s

TJT Capital Group is a participant in Barron’s Big Money Poll, a survey of professional investors conducted twice yearly.

Stamford Advocate

TJT Capital Group contributed to the Stamford Advocate‘s article about Connecticut’s financial services sector.

Morningstar Magazine

TJT Capital Group contributed to the Morningstar Magazine article about Jim Callinan from Osterweis Capital Management.