Need To Know: Dont Be Fooled By Economic Bliss — Here Are 5 Moves To Make Right Now As A Bull-market Hangover Looms Large

Investors still appear to be clinging to the idea that the Goldilocks economy and the bull market is alive and well, with profit growth not too hot to trigger inflation, but not too cold to cause a recession.

Lance Roberts is here to disabuse us of that notion.

“Does that really make any sense?” he wrote in his Real Investment Report over the weekend. “Particularly as we are looking at the longest expansion cycle in the history of the U.S. The problem is in the rush to come up with a ‘bullish thesis’ as to why stocks should continue to elevate in the future, they have forgotten the last time the U.S. entered into such a state of ‘economic bliss.’”

So, when was the last time Goldilocks was such a prevalent theory?

Roberts, who calls it “absolute nonsense” and an “oft-repeated monument to trite,” pointed to this quote from the Wall Street Journal back in early 2007: “The Fed’s official forecast, an average of forecasts by Fed governors and the Fed’s district banks, essentially portrays a Goldilocks economy that is neither too hot, with inflation, nor too cold, with rising unemployment.”

Less than a year after the quote, the U.S. tripped into recession, opening the door to the worst financial crisis since the Great Depression.

“Unfortunately, today’s Goldilocks economy is more akin to what we saw in 2007 than most would like to admit,” Roberts explained, adding that an economy growing at 2%, with inflation near zero and only being kept afloat by infusions from central banks is not an economy to aspire to.

With that in mind, Roberts, in our call of the day, offered up five moves to make now that you’ll appreciate later, when things turn dicey.

• Trim positions that are big winners in your portfolio back to their original portfolio weighting.
• Sell underperforming positions. If a position hasn’t performed during the rally over the last three months, it is weak for a reason and will likely lead the decline on the way down.
• Positions that performed with the market should also be reduced back to original portfolio weights. Hang with the leaders.
• Move trailing stop losses — a type of trade order aimed at protecting investors from a security’s downside — to new levels.
• Review your portfolio allocation relative to your risk tolerance. If you are aggressively weighted in equities at this point of the market cycle, you may want to try and recall how you felt during 2008. Raise cash levels and increase fixed income accordingly to reduce relative market exposure.

Not much in the way of “bliss” for investors so far this morning, with stocks bouncing around breakeven in premarket action.

Read: Headwinds might turn into tailwinds soon for U.S. economy

The market

The Dow DJIA, +0.25%  is moving slightly lower, while the S&P SPX, +0.37%  and Nasdaq COMP, +0.34%  are mostly flat. The dollar DXY, -0.02% is barely budging; same with gold GCJ9, +0.15% Crude CLJ9, -0.15% is gaining ground.

More coverage in Market Snapshot

Europe stocks SXXP, +0.27% are up in the latter part of their session, while Asia markets ADOW, +0.77% saw a mostly stronger day, paced by the Shanghai Composite SHCOMP, +2.47% The Nikkei NIK, +0.62% rose less than 1%.

The buzz

There’s a bit of M&A news bright and early, with Fidelity National Information Services FIS FIS, -0.70%  buying e-commerce and payments group WP, +9.96% WPY, +9.31%   in a cash and stock deal that values the latter at $43 billion.

And ride-sharing app Lyft LYFT, +0.00% confirmed it’s looking to raise up to $2.09 billion in an IPO, with announcing plans to offer 30.77 million shares to the public at a price of $62 to $68 a share.

Boeing BA, -1.77%  is dragging on the Dow after The Wall Street Journal reported federal prosecutors and Transportation Department officials are probing the development of the company’s 737 MAX jetliners, involved in two fatal crashes, the most recent an Ethiopian Airlines passenger jet.

Donald Trump steps up in defense of Jeanine Pirro, whose program, without explanation from Fox, didn’t air in its regular Saturday time slot. Her absence, of course, followed anti-Muslim comments she directed last week toward Rep. Ilhan Omar. More to come on this front, no doubt.

New Zealand Prime Minister Jacinta Ardern’s promise of tightened gun laws in the wake of the Christchurch mosque shootings has been widely welcomed by a stunned population. She has said options include a ban on private ownership of semi-automatic rifles and a government-funded buyback of newly outlawed guns.

The stat

In case you forgot how well cryptos are holding up:

The chart

The Visual Capitalist blog posted this graphic, using data in purchasing power parity terms from Standard Chartered and the IMF to show the economies adding the most to global growth in 2019:

As you can see, Asia is projected to account for 63% of all global GDP growth this year, mostly thanks to China. India and Indonesia will contribute to the “Other Asia” share, while Japan will only contribute 1% to the global growth total. The U.S. will lead the pack of developed economies in contributing to global growth.

The quote

“The middle class and capitalism are the gears that turned back Hitler and AIDS, and the lubricant for the middle class is education. We are now throwing sand in the gears of upward mobility for the middle class” — NYU professor Scott Galloway, chiming in on the college admissions scandal.

The tweet

The economy

Existing home sales will probably be the most closely eyed report this week, but we won’t have a look at that until Friday. We’ll also hear from the FOMC in the coming days but no change to policy is expected. As for Monday, the March NAHB homebuilder survey is released at 10:00 a.m. Eastern.

Random reads

These 22 books on investing will make for a better investor.

A murder investigation is under way in Italy after the death of a Moroccan model who testified against Silvio Berlusconi in 2012.

Dutch police on the hunt for shooter who opened fire on a tram, killing one, injuring several others

How parents are robbing their kids of adulthood.

This admissions scandal is just the tip of the iceberg.

Why do we care so much about what politicians eat?

This is what happens when you attack a government official in Australia with an egg and try to video his reaction.

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