We have seen quite a bit of fear this past week regarding the debt issues of Greece and the Chinese Stock market. You would think that the world is suddenly coming to an end. Our opinion? It’s not. Greece’s debt and the country’s inability to pay it should be no surprise. The world knew this deadline was coming, and here it is. China, on the other hand, is showing the same signs of pre-bubble euphoria as did the NASDAQ in 2001. And while we know how that story ended, we also know how to manage that type of risk in a portfolio.
The interesting part to us has been the media’s complete inability to separate between the US and International markets during this time. While Greece’s & China’s issues have had a negative effect on International markets, the US markets have largely ignored it. We still remain in the same range we’ve been in for 5 months now.
This is where paying attention comes in handy. Shadowridge sold all international holdings in our SDW CORE portoflios at the end of June. So far that has worked out well for us. A month before that, we reduced our bond market exposure. The only bright spot in the world that we see, right now, is the US stock market. And we’ll take flat over down any day.
To help with perspective on the US stock market (The S&P 500): The middle blue line is where we started the year. The top red line is approx 3% above the starting point, and the bottom red line is approx 3% below the starting point.
The (above) Chart is the Daily S&P 500 From January 1 to July 8, 2015
Here you can see that, even after a good drop in June, the S&P 500 is still within 1% from where we started the year. That’s not a sign to start selling off US holdings – yet. As always, we’ll be monitoring the situation closely and do our best to keep your investments in front of the latest market trends, wherever that may be.
And like Warren Buffet says “Be fearful when others are greedy. Be greedy when others are fearful.”