2019 Government Shutdown and the Market
Historically, the past 20 government shutdowns (starting in 1976) have had negligible effects on the U.S. stock market. According to an LPL study, “Stocks tend to take [government shutdowns] in stride,” despite the wealth of media coverage and hype surrounding them. Naturally, given the length of time that the current shutdown has gone on, many economists and outlets have begun to wonder if and how the stock market may react differently this time.
Early dips in the market last December were explained away as unrelated to the shutdown. But now, as Market Watch reports, the shutdown has begun “setting records, and investors might not be able to ignore it for much longer.” As of January 16th, a Wednesday, the shutdown has entered its 26th day, five days (and counting) beyond the previous 21 day record set during the Clinton administration, circa 1995.
Just one day prior, day 25 of the shutdown, Jamie Dimon, Chief Executive for JP Morgan Chase, warned that the partial shutdown indeed has the potential to “wipe out growth if it lasts the entire quarter. Gregory Daco, chief U.S. economist at Oxford Economics, posits that estimated the shutdown would shave 0.2 percentage points off first-quarter gross-domestic-product (GDP) if it lasts through January, bringing the firm’s GDP tracker down to 1.9% annualized growth. If it lasts through the end of March, Daco cautions, it would shave off 0.6 percentage point, slowing the pace of growth to 1.5%.
One mostly overlooked yet vital component affected greatly by the shutdown is how it has deprived traders, economists and policymakers of approximately 10 crucial government data memos. Such key data included information regarding housing, trade and consumer spending. Many have estimated a months-long process of normalizing, even after the shutdown is concluded. Daco further proposes that “this lack of data will favor an even more cautious approach from the [federal government] when it comes to normalizing monetary policy.”
Daco and Dimon are not alone in their calls of “this time could be different”. Mike Loewengart, head of investing strategy at discount broker E-Trade, agrees. By his assessment, the shutdown “adds to the perfect storm-type atmosphere currently engulfing stocks.
“Without a doubt it could fuel the anxiety and calamity we’re seeing in the market,” Loewengart insists. “There are two ways to look at it: Either it will create short-term volatility, or usher in a more pronounced correction.”
When weighing the potential effects on the stock market that could follow from the government shutdown, we must properly evaluate the factors influencing the U.S. stock market’s performance.
According to CCN, the three major factors are currently at play include the Federal Reserve interest rate, earnings reports of major U.S. conglomerates, and the trade war between the U.S. and China.
Equally comforting yet bleakly sobering, CCN doubts that the “missing paychecks of hundreds of thousands of federal employees” are sufficient enough “to have any meaningful impact on the performance of the stock market.”
Adam Funds CEO Mark Stoeckle has boldly declared that “Events like a government shutdown are just part of the growing noise coming out of Washington that investors should ignore.”
Despite his confidence, Stoeckle is largely alone in his positivity. Analysts are widely remaining cautious due to the sheer amount of variables that are threatening to keep the market volatile for weeks and maybe even whole months to come.
Irrespective of what will happen or who is right, analysts and economists can agree with CNBC that “the jury is still out on what 2019 will bring for investors.”
Whatever 2019 brings, many investors are already looking forward to a number of growth stocks for the year. Such stocks include Twilio (TWLO), Lululemon (LULU), Mongo DB (MDB), Amazon (AMZN), and Sarepta Therapeutics (SPT). Amazon, of course, needs no introduction. The e-commerce Leviathan’s growth shows no signs of slowing.
Twilio is a cloud communications platform. 2018 proved a highly successful year for Twilio, signaled by factors such as accelerating revenue, multiple expansions, and the overall tripling of their shares’ value.
The 2018 holiday season led to a tremendous growth period for athletics apparel retailer Lululemon. Top-rated Buckingham analyst Eric Tracy is so confident in LULU shares that recently upgraded the stock from “hold” to “buy”. In fact, out of thirteen top-performing analysis, only two stuck with “hold”, the remaining eleven upgrading LULU to “buy”.
Cloud-computing company Mongo DB (self-touted as “the most popular database for modern apps”) has remained on the “buy” list of many prominent analysts.
Sarepta Therapeutics is a healthcare stock focused on precision genetics medicines to treat rare, invasive, deadly neuromuscular afflictions. Thus far, their only drug, Exondys 51 is seeing extremely good sales in the U.S. Exondys 51 treats Duchenne muscular dystrophy (DMD), a genetic disorder characterized by progressive muscle degeneration and frailty.
Despite the stresses and fears brought on by the government shutdown, there remain good reasons to stay optimistic. However, Sandy Chin, an experienced portfolio manager, has many informed opinions and suggestions regarding volatile markets.
Tidal Bore Capital and Sandy Chin
For over 20 years, Sandy Chin has managed the buying and selling of staple consumer level stocks. Her undisputed expertise is as a portfolio manager. She is “the brainchild” of the Tidal Bore Capital hedge fund, launched in 2016 by Sandy Chin. Tidal Bore Capital has allowed her to manage portfolios focusing almost exclusively on bottom-up analysis.
Sandy Chin was the senior analyst at SAC Capital Management in a consumer only portfolio management group. She began managing a hedge fund during her time at Visium Asset Management. Prior to SAC Capital Management Chin worked at Moore Capital Management, her first position on the buyside at a long/short firm. Before that, Sandy Chin served as the Vice President and senior analyst at Neuberger Berman.
Sandy Chin also worked on the sell-side at Bank of America and Donaldson, Lufkin & Jenrette where she met her mentor, William “Bill” Leach, who she would collaborate, learn, and study from throughout ten years.
“Bill helped me obtain promotions and new titles in tandem with attending business school,” Chin says. “The business school program was an arduous two-and-a-half-year. He helped me navigate the overwhelming responsibility of managing my own sector while also making sure I was able to meet my academic goals. In Bill’s case, he was able to help me see the forest and the trees by keeping me focused on my long-term goals while meeting short-term assignments and requirements. This is unusual in a mentor as most tend to help with long term goals not daily analysis and stock picking.”
Sandy Chin has an MBA from the prestigious New York University Stern School of Business and received a BA in political science from Columbia Universities Barnard College.
Chin spent ten years under the mentorship of Bill Leach and through that time honed her analyst skill set. She launched Tidal Bore Capital with Bill, reuniting as a team after six years at separate firms.
Find out more about Sandy:
Sandy Chin, understandably with her expertise, is a champion of confidence. “Don’t be afraid to ask for more,” she insists. “Ask for higher wages, ask for more opportunities, ask for more promotions, ask to sit in on more meetings, ask to participate on more management and analyst phone calls. Ask for more whenever you can. The more experience you have in all facets of finding short term, long term long and short stocks the better your insight on stock picking will become.”
Stock market drops, especially for small-time investors, can be especially scary as uncertainty about investments looms. But as history shows, these drops are often temporary, and though they sometimes take longer to rebound from they work themselves out. Still, keeping calm when your money and livelihood is on the line is its own full-time job. Here are some of the things that professional investors and entrepreneurs do when markets experience volatility. While they aren’t a cure-all or elixir that makes everything immediately right, they help investors keep cool and make good decisions while waiting to see the outcome of the market.
Chin has five key pieces of advice for those mindful and concerned during a stock market dip:
1. Research the History of Your Stocks
In December of 2018, Apple’s stock prices dipped historically low. While many factors are cited as to why, reports speculated that this might be the time to cut ties with Apple. Many reporting on Apple’s situation considered them at a plateau, but history shows that many stocks go through ups and downs. Growth has slowed from the 37.3% growth reported at the beginning of this stock offering. But that does not necessarily mean that it will decline from here. Researching stocks not only requires investors to put faith in a stock but gives investors a better idea about what might be happening with the overall market. Now, many classically productive stocks are in decline, which means more research and consultation with a variety of stock experts is important currently. Sandy Chin says that before even investing in any stock, research should be done about that stock. Not only will this help investors understand whether an investment in that stock is a good idea, but it will also help them understand when to buy and sell shares in the future.
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What amateur investors and those unfamiliar with the way the stock market works might be interested in knowing is that the December fourth drop was the consequence of chain reactions on all levels of investment. Professional investors saw this as a potential indicator of economic slowdown, which impacted the way their investment group interacted with stocks. Investment apps and algorithms saw this drop and reacted according to their programming, causing even further descent. Lastly, individual investors saw their investments falling and reacted accordingly.
2. The More Opinions the Merrier
While a chorus of many voices simultaneously might be end up confusing some, they actually offer invaluable aid in the challenge to understand your investments. Investment experts often have expertise in specific stocks, specific markets, and their strengths lie in different aspects of the investment process. Relying on only a few voices to mold your stock market knowledge is a mistake. Sandy Chin recommends listening to those with more experience than yourself, relative newcomers, and everyone in between. This will form a well-rounded knowledge about the elements of trading and will help you know when to sell and when to hold on to your investments.
3. Invest in New Stocks
Let’s explore a hypothetical: If a major stock like Apple were to become a “sell” stock, it then becomes necessary to widen your portfolio by investing in new stocks. Of course, such new investments takes on an element of risk, but by following the previous bits of advice and increasing your knowledge about a plethora of different stocks, selecting a new stock to invest in should not be hard. Then if Apple, or whatever your tried and true stock may be, becomes a “sell” stock your new investments have a greater potential of making you money in the wake of that stock’s sale.
Investing in new stocks goes with Sandy Chin’s “willing to learn” philosophy: younger entrepreneurs should give potential investors and investments equal amounts of their time along with learning more about them. Even if investment in a new stock is short-term, it helps you gain an advantageous knowledge about competition.
4. Go into Investment with a College-Like Mindset
Entering the United States stock market has been likened to attending your first day of college: You may believe you’re at the top of your class, but after taking your first class you realize you might not know quite as much as you once thought you did. The stock market will always present new trading techniques to learn, as well as potential investments in need of studying in order to get the most out of your experience. Those determined to grow as the stock market grows have the greatest chances of being successful. Errors and mistakes only happen when investors mistep by believing they know everything there is to know about the markets. Following Sandy Chin’s previous three steps will empower any investor with the ability to continue financial education and stay cool as the markets fluctuate.
Chin believes that all new entrepreneurs should expect to put in extra effort and keep in mind this effort will need to be sustained over their careers. “Conditioning your mindset for the retention of lots of information is crucial”, says Chin, “and in the long run it will help you learn more information in shorter amounts of time, which gives you an obvious advantage over your competitors.”
5. Don’t Undervalue the Power of the Individual Investor
There is continually a healthy debate over the worth of the individual investor’s role in the stock market’s future. Making savvy investments may appear impossible for most Americans due to the relative concentration of investments by day traders. Such concentration inevitably plays a big role in how the markets perform. Still, it is vital that the average individual feel encouraged to invest in stocks. Everyone from those who have invested for years to those who are relatively new at it will not only help the market thrive but might improve the market for the better. The individual investor plays a vital role in the market and without them, the markets would look much different.
“Ambitious and Eager,” Chin insists. “Entrepreneurial organizations often start out as individuals, and without ambitious and eager attitudes nothing would get done, including massive changes to our economy and stock markets.”
As we begin 2019, many investors are on the edge of their seats. Will we see further market drops? Will the prices of stocks change drastically and leave investors rethinking their strategies? Only time will tell. But one thing that is certain is that it will be continually important for investors to listen, learn, and remain flexible. Individual growth and the growth of the stock market depends on it.
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