September’s normal seasonal weakness was on display again this year as stocks pulled back during the month.  The S&P 500 closed the 3^rd quarter roughly where we started, but is still up almost 15% this year. (YCharts)

While most investors enjoy seeing this type of strength in stocks, it can raise questions about what the future may hold, specifically: whether stocks can continue to move higher.  This was a concern we heard frequently in the beginning of this year.  Performance has been strong since then, but we wouldn’t be surprised to see some market volatility as we’ve had very little this year and volatility is a normal and healthy part of a growing market.

While we don’t try to predict short term market movements, we use our economic dashboard to help us forecast what we feel is likely over the next 9-12 months.  Right now, we feel that there are very few signs of a recession in the near future which means we want to continue to position portfolios for growth. 

Here’s a quick overview of our current dashboard:

• Five of seven indicators are green and show no signs of a late-cycle warning.  We are seeing particular strength in the following areas:
  • Leading Economic Indicators - the steady upward trend suggests continued economic growth.
  • Business Confidence –ISM Manufacturing PMI remains strong (well above 50) and continues to suggest ongoing strength in manufacturing.

• Two of our indicators are flashing yellow (not red) which means we’ll be keeping a close eye on these moving forward:
  • Valuations – stock market valuations appear elevated.  This isn’t a reason to sell, and has historically not been a good timing indicator, but it should be noted that stocks don’t look “cheap” at these levels.
  • Market Breadth – market breadth is a measure of how many stocks are advancing vs. declining – the more advancing the healthier for stocks.  Recently we’ve seen market breadth narrow (not as many stocks have been going up).  We’ll continue to watch this signal for future deterioration.

While we may see some shorter-term volatility, our dashboard supports our positive view for the economy and for stocks over the next 9-12 months. Therefore, we continue to invest portfolios accordingly. We will keep you updated on any changes to our dashboard and will be ready to make changes to portfolios as needed.

We wanted to close this email with an announcement we're very excited to make! Our team has been hard at work on a new service model, and starting in October (which happens to be National Financial Planning month), we will begin offering a new Financial Planning subscription model! Our new model was created based on the valuable feedback we’ve received from our clients and will allow us to make our planning services more widely available starting at $50/mo.

We'll be sharing more information on this new plan over the weeks to come via our blog and social media channels, but we wanted you to hear it here first! Please stay tuned, and if you have any questions or would like to chat with us to see if this new model is right for you, please reach out to schedule an appointment. We look forward to hearing from you!

Sincerely,

Your team at TLWM

* Investment advice offered through TLWM, LLC., a registered investment advisor.

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* Past performance does not guarantee future results. Investing involves risk, including loss of principal.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

* Stock investing involves risk including loss of principal.

* This document is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Texas Legacy Wealth Management and its representatives are properly licensed or exempt from licensure.

* No strategy ensures a profit or protects against a loss.