Private Client Group

September 17th, 2017

How to Prepare for a Market Downturn?

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Could the effects of the hurricane extend to your portfolio? And what data should you keep an eye on as the dollar slides? Get the answers to these questions and much more in this week’s edition of the Steady Investor’s Week.

The U.S. Dollar’s Slide – with so many political and hurricane-related distractions of late, few market-watchers have noticed the U.S. dollar’s persistent slide over the last several months. The ‘greenback’ has fallen fairly substantially against both the yen and euro, as traders may be hedging against hurricane damages, the North Korea situation, the European Central Bank’s surprise tack to potentially tightening monetary policy later this year, and/or the potential for a disappointing or delayed outcome related to tax reform. Whatever the cause, the U.S. dollar index is now at its lowest level since January 2015. As we’ve written before, a strong or a weak dollar is not inherently good or bad for stocks. Stocks have performed well under a weak dollar, just as they have when the dollar is strengthening. The key data to watch will be exports and inflation, to see how a weak dollar may boost both.

Major Equifax Hack – the consumer credit reporting agency, Equifax, disclosed this week that they were the subject of a massive data breach that may have potentially affected 143M consumers in the U.S. The hackers were able to access names, Social Security numbers, birth dates, as well as some credit card numbers. If you were a customer of Equifax or have used their services to obtain credit reports or other credit information, you should reach out to Equifax to take the necessary precautionary steps. To date, however, consumers have been highly critical of Equifax’s efforts to contain the damage, citing ongoing problems with a website set up to help consumers. U.S. regulators have urged everyone affected to freeze their credit reports, a move some lenders fear could adversely impact credit growth.

Hurricane Harvey Damages – Mitch Zacks wrote this week about the persistent gap between reality and expectations when it comes to hurricane-related damages and their ultimate economic impact. Of the last ten or so hurricanes and superstorms, none has been big enough in scope to deter economic growth or stock market appreciation in the twelve-month period following it. Many investors have been concerned that Hurricane Harvey could be the exception to this rule, with the storm expected to bump-up against Hurricane Katrina as one of the costliest disasters in postwar U.S. history. With damages approaching 1% – 2% of GDP for Q3, it could very well be that we see a few points shaved from Q3 numbers. As Mitch points out in his column, however, there is likely to be a neutralizing impact from rebuilding efforts, government spending, and overall consumer spending down the road, though not necessarily felt in Q3.

Stay Tuned: Plans for Tax Overhaul to be Released Week of September 25 – Investors are waiting with bated breath as Republicans are set to announce a more detailed framework for tax reform, sometime in the week of September 25. Details on the plan are sparse so far. But Republican lawmakers have been bouncing around the ideas of about repealing the estate tax, eliminating the alternative minimum tax, lowering taxes on capital gains and dividends, cutting taxes on corporations, reducing tax rates on individuals and creating a special lower tax rate for businesses that pay taxes on their owners’ individual tax returns. With that many potential tax cuts, it is difficult to see how the plan will be revenue neutral, unless deeper spending cuts are proposed in tandem with the tax plan.

Even with the dollar sliding to record lows and hurricanes leaving a wake of damages, the market right now and for the foreseeable future is steady. Still, many investors have been asking us how they can prepare for a potential market downturn. While volatility is a normal, natural feature of equity investing, the key to preparing for it is realizing there is no way to eliminate it, but many approaches for dealing with it. To help investors prepare for a potential downturn, we have created a just-released guide that will provide investors with tips and tricks for dealing with volatility. To download your exclusive copy, click on the link below:

Disclosure

DISCLOSURE

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. The information contained herein has been obtained from sources believed to be reliable but we do not guarantee accuracy or completeness. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Returns for each strategy and the corresponding Morningstar Universe reflect the annualized returns for the periods indicated. The Morningstar Universes used for comparative analysis are constructed by Morningstar (median performance) and data is provided to Zacks by Zephyr Style Advisor. The percentile ranking for each Zacks Strategy is based on the gross comparison for Zacks Strategies vs. the indicated universe rounded up to the nearest whole percentile. Other managers included in universe by Morningstar may exhibit style drift when compared to Zacks Investment Management portfolio. Neither Zacks Investment Management nor Zacks Investment Research has any affiliation with Morningstar. Neither Zacks Investment Management nor Zacks Investment Research had any influence of the process Morningstar used to determine this ranking.
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