A stock market shock refers to a sudden and significant event that causes a rapid and often unexpected change in stock prices or the overall market. These shocks can lead to dramatic increases or decreases in the value of stocks and are typically caused by factors such as:

1. Economic Events: Major changes in interest rates, inflation, or GDP growth.

2. Geopolitical Events: Wars, terrorist attacks, or political instability.

3. Corporate Events: Bankruptcy, fraud, or a major company missing earnings expectations.

4. Natural Disasters: Earthquakes, hurricanes, or pandemics that disrupt economic activity.

5. Market Sentiment: Sudden panic or over-enthusiasm driven by herd behavior.

6. Policy Changes: New government regulations, tax changes, or central bank actions.

For example, the stock market crash of 1987, also known as Black Monday, was a shock where the Dow Jones Industrial Average dropped 22% in a single day. Similarly, the onset of the COVID-19 pandemic in early 2020 led to a sharp shock as global markets reacted to uncertainty and economic disruptions.

Stock market shocks often create ripple effects in the economy, affecting investor confidence, consumer spending, and business investments, and today, January 27th, 2025 - we had one!

Today’s Stock Market Shock

Today's stock market shock was driven by concerns over a new AI model from China's DeepSeek, which threatens U.S. tech dominance. The Nasdaq fell 3%, with Nvidia losing $589 billion in market cap value - the largest single-day loss in U.S. stock market history.

DeepSeek's AI app, which supposedly can match ChatGPT's capabilities but with much lower costs, had Wall Street swiftly reassessing valuations amid fears of increased competition. So what can one do in the aftershock?!

How To Handle a Stock Market Shock

Handling a stock market shock as an investor requires a combination of preparedness, emotional control, and strategic action. Here’s a roadmap:

1. Stay Calm and Avoid Panic

• Market shocks can trigger emotional responses, but rash decisions often lead to losses.

• Take a step back and avoid making impulsive trades. Remember that market volatility is a normal part of investing.

2. Review Your Investment Strategy

• Revisit your investment goals, time horizon, and risk tolerance. If you’re a long-term investor, short-term shocks may have little impact on your ultimate goals.

• Ensure your portfolio aligns with your risk tolerance. If it doesn’t, consider gradual adjustments once the market stabilizes.

3. Diversify Your Portfolio

• Diversification helps reduce risk during market shocks. A mix of stocks, bonds, and other asset classes can cushion losses.

• Include investments in different sectors, geographies, and asset types to minimize exposure to a single event.

4. Avoid Timing the Market

• Trying to predict the bottom or top of the market is extremely challenging and often counterproductive.

• Stick to a disciplined investment approach, such as dollar-cost averaging (investing a fixed amount regularly, regardless of market conditions).

5. Reassess, Don’t Overreact

• If you’ve done your research and chosen solid investments, market shocks are typically temporary.

• Reassess individual stocks or funds to ensure they still meet your criteria. If the fundamentals are unchanged, you may not need to act.

6. Look for Opportunities

• Market shocks can create buying opportunities as high-quality assets may temporarily drop in value.

• If you have cash reserves, consider taking advantage of lower prices to invest in undervalued assets.

7. Maintain a Cash Reserve

• A cash reserve can provide peace of mind and liquidity during volatile times.

• Avoid selling investments at a loss to cover short-term expenses by keeping an emergency fund.

8. Seek Professional Advice

• If you’re unsure about what to do, consult a financial advisor - like Leverage Financial Advisory!

• They can provide guidance tailored to your financial situation and help you navigate the shock effectively.

9. Focus on the Long Term

• Historically, markets have recovered from shocks and crises over time.

• If your investment horizon is long-term (e.g., for retirement), temporary declines are often just bumps in the road.

10. Educate Yourself

• Understand the causes of the shock and how it might affect your investments. This knowledge can help you make informed decisions rather than emotional ones.

By staying disciplined, prepared, and informed, you can weather market shocks and potentially use them as opportunities to strengthen your portfolio.

Thanks for reading and have a great week ahead!

Brian Bond, CMT

With just over two weeks until the 2024 presidential election, the contest between Vice President Kamala Harris and former President Donald Trump remains tightly contested. Wall Street investors, including billionaire Stan Druckenmiller, have expressed confidence in Trump's chances of winning, which he says are reflected in stock market trends. Meanwhile, former President Barack Obama and Michelle Obama are set to join Harris on the campaign trail in the final weeks, aiming to boost her support.

This leads us to the question I have been asked a lot lately by family, friends, and clients;

Polymarket Odds

The chart above is from Polymarket, a prediction market platform that allows users to bet on the outcomes of various events. The odds shown above are based on over $2 Billion Dollars of bets placed on who will be the next President. However, due to U.S. regulatory issues with gambling and prediction markets, U.S. residents are generally restricted from betting on Polymarket. Therefore, these bets come from people outside the U.S., so take the odds with a grain of salt. (You can click on the image to see the live updates).

Kalshi Odds

Kalshi is similar to Polymarket, except U.S. citizens can legally bet on this platform. It is a federally regulated events predictions exchange. Kalshi operates under the oversight of the Commodity Futures Trading Commission (CFTC), which regulates derivatives markets in the U.S. The caveat with Kalshi however is that it is a much smaller platform than Polymarket. As of the time I am writing this, there have only been $34 Million Dollars of bets placed on Kalshi for the Presidential Election - less than 2% of the amount placed on Polymarket. (You can click on the image to see the live updates).

The Stock Market

The two betting markets shown above are both favoring former President Trump. However, if you look at the polls it appears to be a much tighter race, with Vice President Harris slightly ahead.

So if VP Harris becomes President what will happen to the stock market? The most recent evidence we have to look at is how the stock market (S&P 500) has performed under the Biden Administration. As you can see below, 3 out of 4 years have been pretty strong, but many investors are still scarred from that nasty bear market in 2022.

What if Trump wins? Oddly enough, the four-year performance of the stock market under the Trump Administration looks very similar to Biden’s. 3 out of 4 years were strong, with a decline in year 2.

Now what if we go back 80 years? Has it made a difference whether the President was a Democrat or a Republican? Not really. There have been ups and downs. At times some BIG ups and downs. But over the long haul, regardless of who was in office, the stock market has gone up.

Stick To Your Plan

So what will happen to the stock market if ______ becomes President? I have no idea, but history suggests it doesn’t make much of a difference. Regardless of who wins, my investment strategy will remain the same; I own a variety of short-term treasuries and investment-grade bonds for my emergency fund. For my longer-term investments, I primarily invest in Leverage Financial Advisory’s top-ranked low-cost index funds and a diversified portfolio of stocks from companies demonstrating above-average revenue and profit growth with strong price appreciation. That’s my plan, it works for me, and if ______ becomes President, I’m sticking to it.

Have a great week ahead!

Brian Bond, CMT

I haven’t written in a while. August was a non-stop month for me. My rental property flooded. A tree fell on my house. My vacation was canceled. And the stock market crashed. My August was one of those months my mother would say “builds character.” Now the kids are back in school, the NFL season has begun, and I, and the stock market, are back to neutral.

August 1st

I’ve been a landlord for over ten years. I will tell you that 90% of the time renting real estate is pretty good. The rent hits your bank account on the first of the month, time goes by, property values go up, and all is well. That other 10% of the time, that’s where you earn every nickel.

The photo below was taken after I received a panicked phone call from my tenant at 5am telling me that water was pouring into the kitchen and living room from the unit above - completely soaking the electrical panel.

August 4th

A massive pine tree falls on my house. The top 20 feet of the tree, which you don’t see in the image below, hit the back corner of my roof, snapped in half, flew over the house, and took out my deck. My insurance company, which covers my rental property and my house, loved me that week (shoutout to Liberty Mutual).

August 6th

The stock market enters Extreme Fear territory! Starting in mid-July the stock market began falling rapidly after Trump got shot. Then one week later Biden dropped out of the race, and fears of a recession began to take over the news. Those three things created a lot of uncertainty, which the stock market hates more than anything. And when you manage millions of dollars of other people’s money, as I do, you pay close attention to that.

Sometimes All You Can Do Is Laugh

That was the first six days of my August. It was most definitely character-building. Here is how I was able to get through it: That night I got home from work, I hugged my wife and daughter, took my dog for a walk, looked at the fallen tree in my yard, looked up at the sky, and laughed. “What else you got!?!?”

I’ve been dealing with these types of situations long enough that I know they are short-lived. They are anomalies. They are the “10% of the time.” And sometimes when everything is coming at you all at once, all you can do is take the ass-whooping and laugh it off. And when the dust settles, as it always does, you get back to neutral and move forward.

August 24th

My wife and I have a night out in Boston.

August 30th

The stock market recovered about as fast as it declined. Extreme Fear turned out to be a great buying opportunity. And the month of August was history.

Today

Investors await the Federal Reserve’s decision tomorrow about whether they will finally cut interest rates after over two and half years.

Will they cut by 0.25% or 0.50%? How will the stock market react to what they decide? Will mortgage rates drop? Will banks lower their interest rates? Whatever happens - we’ll get through it.

Thanks for reading!

Brian Bond, CMT

Every July around 1 million people gather in Pamplona, Spain for the annual San Fermín festival and the Running of the Bulls. Each morning for over a week thousands of participants run a half mile through the city with the bulls.

It’s fast, it’s intense, and it’s organized, but it also comes with big doses of chaos - much like the stock market. Ten years ago I crossed this off my bucket list with my two roommates from college (Doug and Rany).

July 2014 - Pamplona, Spain: Revisiting the course at night where we ran with the bulls that morning

Bulls

On my mother’s side I have Spanish roots. The Spanish have a long-standing cultural and historical appreciation for bulls. With the help of my research assistant, ChatGPT, I found some interesting reasons why.

Bulls generally have a distinct demeanor, they are relatively calm when left alone, but are also:

Protective: They can be highly protective of their herd, especially if young calves are around.

Curious: While they can be aggressive, bulls are also curious. They may approach new objects or situations cautiously but with interest.

Alert: Bulls are generally very alert and responsive to their environment, quickly reacting to perceived threats or changes in their surroundings.

Unpredictable: Bulls can be unpredictable, especially if they feel provoked or threatened.

Strong: Bulls are physically powerful and capable of quick, forceful movements.

If you’ve ever invested in the stock market you might have noticed it has similar characteristics.

Running WITH the Bulls

The Running of the Bulls has practical beginnings and a rich tradition. In the 13th and 14th centuries, cattle had to be transported from the Spanish fields outside Pamplona to the bullring in the city for bullfights. To move the bulls through the narrow streets, herders would guide them with the help of runners.

Over the years the annual event became a central part of the San Fermín festival, which honors Saint Fermín, the co-patron of Navarre. Everyone wears white, with a red sash, and drinks Coke mixed with red wine - it’s like a Where’s Waldo festival for adults. You have to see it to believe it.

The one thing I noticed the morning I ran with the bulls was that most of the local runners treated the run like a sporting event. They were stretching, warming up, focused, and prepared. There was tremendous respect for the bulls.

And when the gun went off and the run began, the best Spanish runners ran alongside the bulls - with the bulls, embracing their energy, not fighting it.

Bull Markets

Years ago when I became interested in the stock market I remember hearing the term “bull market” on TV all the time. Why do they call it that?

A "bull market" is a term used to describe a period of rising stock prices and general investor optimism. There are a couple of theories about the origin of the term: Bulls attack by thrusting their horns upward, symbolizing the upward movement of the market. And in medieval times, bulls were seen as symbols of prosperity and growth.

In contrast, a "bear market" is used to describe a period of falling stock prices and investor pessimism, as bears attack by swiping their paws downward.

Running with the Bulls and investing in the stock market have many similarities. Both involve elements of risk, excitement, and strategy. They reward participants who are prepared and respectful. They punish those who are not.

The very best at both share the unique ability to find the rhythm of the bulls and the trends of the markets. They run with the bulls, not against them.

Onward and upward, have a great week!

Brian Bond, CMT

The stock market has been on fire this year! Yesterday, the US stock market closed at an all-time high, kicking off the July 4th celebrations in style. As I wrapped up my day, feeling pretty good, I thought about our old friends across the pond and how far we’ve come over the past 248 years.

Then I looked at some numbers, comparing the five largest American stocks to the five largest British stocks - and the results were remarkable.

Quick Summary

The combined value of the 5 largest US Stocks = $14.3 Trillion

Here’s what that looks like: $14,300,000,000,000.

The combined value of the 5 largest UK Stocks = $692 Billion

Here’s what that looks like: $692,000,000,000.

The Difference = $13.6 Trillion!

United States

1) Microsoft - The top dog worth $3.4 Trillion! Word, Excel, Outlook, Teams, Xbox, Cloud, and they are now leading the charge in Artificial Intelligence.

2) Apple - Worth $3.39 Trillion! Dominating the tech world, Apple's products and ecosystem set the bar for quality and design.

3) NVIDIA - The newest member of the $3 Trillion Dollar Club. NVIDIA is a technology company renowned for its graphics processing units (GPUs) used in gaming, professional visualization, data centers, and Artificial Intelligence (AI).

4) Alphabet - The artist formerly known as Google, a powerhouse in digital advertising and AI technology worth $2.3 Trillion.

5) Amazon - With its vast e-commerce empire, Whole Foods Supermarkets, Prime membership, and expanding AWS cloud services, Amazon is a juggernaut worth $2.05 Trillion.

United Kingdom

1) AstraZeneca - A pharmaceutical company you may remember from their Covid vaccination. AstraZeneca is pivotal in healthcare advancements and is worth $187.4 Billion.

2) Shell - Yes that Shell where you get your gas. They’re a global energy company specializing in oil, natural gas, and renewable energy solutions worth $180.7 Billion.

3) HSBC Holdings - As one of the world's largest banks, HSBC plays a crucial role in global finance and is worth $128.2 Billion.

4) Unilever - A British multinational consumer goods company known for brands like Dove, Vaseline, Axe, Ben & Jerry’s, and Hellmann's worth $107.5 Billion.

5) Rio Tinto - One of the world's largest mining companies, producing essential materials such as iron ore, aluminum, copper, and diamonds. Headquartered in the UK, it operates globally and is worth $88 Billion.

The differences between the five largest companies from each country are noteworthy, and something Americans should be incredibly proud of. The United States has five of the largest, most innovative technology companies in the world, each worth over two trillion dollars.

If our founding fathers were here today, they would likely feel proud of the remarkable progress the US has achieved.

Onward and upward, have a great 4th of July!

Brian Bond, CMT

You can spend it. You can save it. You can make it. You can waste it. You can invest it. You can run out of it. And you will likely always want more of it. It’s not about money though, it’s about something far more valuable - it’s about time.

A few weeks ago I came across these charts on Instagram shared by neuroscientist @tjpower. I’m a big fan of charts that don’t need much explanation and can be insightful to anyone, no matter their age or stage in life, and these hit the nail right on the head.

The first chart above shows how we spend the most time with our family in our early years of life. Once we get our driver’s license and head off to college or the work world, that time gets reallocated to time spent with friends.

As we mature and begin to focus on our careers and personal aspirations, that time then transitions to time spent with coworkers.

Which often coincides with time spent with our partners.

Which for some turns into time spent with children.

And last, but certainly not least, is time spent alone.

I spent a good amount of time looking at these charts. For me, thus far in my life, they are pretty accurate. But they also made me take a step back and think about how and who I’d like to spend my time with as I age.

I’m a big believer that with some thought, planning, and persistence, you can create the life you want. How you spend your time and who you spend it with are important parts of that plan. So let this chart be a general guide rather than a set-in-stone roadmap, and spend your time wisely.

Thanks for reading and have a great week!

Brian Bond, CMT

Here’s an update with some illustrations of the 3-Step Stock Market Correction Playbook.

All three steps have been completed since my last update with Steps 2 and 3 both occurring on May 9th.

Step 1. The S&P 500 closed above the red line, its 21-Day Moving Average. This first happened on April 26th, but at that point, momentum was still weak, and the market fell back down below the red line. On May 3rd the S&P 500 made a second attempt and once again closed the day above the red line, and since that day it’s been off to the races.

Step 2. New all-time highs! Step 2 of the Playbook requires that the market breaks out above its most recent high, which in this case, was the prior all-time high from March 28th. Well, eight days after the S&P 500 got back above its 21-day moving average (the red line from Step 1), it broke through that prior high of 5,264 and closed at 5,308 on May 15th, and most importantly, it did it with some momentum.

Step 3. Momentum exceeds a reading of 60! On May 9th it did just that, hitting a momentum reading of 61. And since that day, all but one trading day has remained above 60 - bullish price action that we like to see.

Congratulations!

We made it through the first correction of the year. Congratulations to those who didn’t panic and sell when things got a little dicey. And an even bigger congratulations to those who leveraged the opportunity to “buy the dip” at lower prices.

When you hear the words “investment risk” and “volatility” regarding stock market investing, the -6% decline we just experienced over the past month and a half is what those words are referring to. It’s what makes stock market investing very challenging at times. You don’t have to do any physical labor, but when you see your account go from $500,000 to $470,000 (or whatever your starting point may be) in less than 3 weeks, it can be unsettling. It’s a mental battle - because money is emotional, and as humans, losses hurt twice as much as gains feel good.

It’s the mental pain we must take, for the long-term financial gain on the other side of these stock market corrections. And having a playbook to follow can keep you calm, cool, and in sync with the market.

Thanks for reading, and have a great holiday weekend!

Brian Bond, CMT

Two weeks ago, I wrote about the current correction the stock market has been going through. Since then, there has been some positive progress.

If you missed it or would like a refresher, click the button below for The Stock Market Correction Playbook.

The 3-Step Playbook

Here’s an update with some illustrations of where we stand as of today’s stock market close.

The 3-Step Correction Playbook

Step 1. The S&P 500 closed above the red line, its 21-Day Moving Average. ✅

Step 2. Price put in a nice low on April 19th and has been climbing higher ever since, but it still hasn't broken out above its most recent high of around 5,200. In the coming weeks, it will be important for the market to remain above that low from April 19th. It can go sideways, or up, just not below that low. If it does, that would indicate that the short-term downtrend lives on. 🧐

Step 3. Our Momentum reading hit 53.6. It hasn’t cleared our benchmark of 60 yet, but it’s getting close. ⛔

I'd give that a 1.5 out of 3 for the Market Correction Playbook - a nice start, and a strong finish to the week.

Have a great weekend!

Brian Bond, CMT

Last week a client called me and said her car had been stolen right out of her driveway. Pretty crazy. Now she needs a new one and wanted to run some numbers. We discussed new cars vs. used cars, leasing vs. buying, luxury vs. practical, and auto loan interest rates.

It was a fun conversation, well probably more fun for me than her since my car didn’t get stolen. Cars are often most people’s second-largest fixed expense behind housing. Buying a new car is an important decision that will impact your financial life for years. You have to consider the ongoing costs of gas and now with EVs electricity, car insurance, and maintenance. After the call, this led me down a little rabbit hole of research and some interesting charts.

Most Popular Vehicles In America

First, I wanted to know what the top-selling cars were in America. When I saw the results sorted by state, it reminded me of the map you see on election night. What jumped out was that in almost every Republican state, the top-selling vehicle was an American-made pickup truck, except for North Carolina, where the Toyota RAV4 took the crown, and Ohio, where the Honda CR-V was number one.

Auto Loan Rates

Next, I wanted to know the difference in auto-loan interest rates for new cars versus used cars.

New cars have less risk because they don’t have any wear and tear yet, haven’t been in any accidents, and the resale values are better. Thus, interest rates on loans for new cars are about 4% less than interest rates on used cars.

What stuck out to me on the interest rate chart was that auto loan rates in the Southern States were higher than in the Northern States. Why would that be? It might have something to do with credit scores. The Southern States have the lowest average credit scores in the country.

In the eyes of the banks, the lower the credit scores, the more risks there are that those auto loans won’t get paid back. And banks charge extra for that risk.

Buying a new car is one of those reminders of how important it is to have your financial life in order. Your credit score will impact the interest rate on your loan. Your interest rate will impact your monthly payments. And your monthly payments will take resources away from other areas of your day-to-day life. Like most things in personal finance, the final decision will require some tradeoffs, and the more prepared you are, the easier the process will be.

Thanks for reading and have a great week!

Brian Bond, CMT

The first three months of the year were great for stocks. The S&P 500 had a smooth ride and was up around 10%. As soon as the calendar turned the page to April, however, there was some turbulence. The market now appears to be in the third week of a correction.

What’s a Correction?

A stock market correction is a term used to describe a relatively short-term decline in stock prices during a long-term uptrend, typically measured by a decrease of 5% - 10% from recent highs. Corrections are normal and historically occur 3 - 5 times per year. Whether they are normal or not, however, they can be unsettling. So here’s a playbook you can use to help navigate through market corrections.

The Long-Term Trend

Whenever the stock market begins to decline, it’s helpful to zoom out and focus on the long-term trend. The chart above is the S&P 500 Index over the last three years. On the chart, there’s an orange line. That line is the 40-week moving average trendline - my North Star. If we’re above that line, we’re in a long-term uptrend. If we’re below it, we’re in a downtrend - simple and effective.

Right now, the long-term trend is up, and after a nearly vertical ascent from November through March, a correction like we’re experiencing now isn’t surprising as investors take some profits.

The 3-Step Checklist

After defining if we’re in a long-term uptrend or downtrend, we can move on to shorter-term time frames and take it day-by-day with a 3-step process.

Step 1 - The market needs to get back above its 21-day moving average. Just as I use the 40-week moving average above to define the long-term trend, I use the 21-day moving average (approximately one month of trading days) to define the short-term trend. We want to see prices recover enough that they get back above this short-term trendline. I’ll use the stock market correction from last August through October as an example.

The market first fell below the 21-day line in early August at the start of a three-month correction. About a month later, it recovered and got back above the trendline but then fell back below it in September. The same thing happened again in October before the market finally bottomed. This shows us that the 21-day moving average is useful but can have false signals, called whipsaws, and it is not sufficient on its own, which brings us to Step 2.

Step 2 - The market needs to break out above its most recent high. Just because the stock market stops going down and begins a short-term uptrend doesn’t mean it’s back in stride with its longer-term uptrend. To help confirm that the long-term trend has resumed and the correction is over, we want to see the market break out above its most recent high, which typically signals the start of a new short-term uptrend.

Using the same example from Step 1, during last fall’s correction it took the market three attempts to clear its most recent high. But when it finally did in early November, it was off to the races for stocks. So what made attempt #3 different from #1 and #2? Momentum!

Step 3 - Momentum needs to hit 60. Momentum is the most powerful thing in sports, life, and investing. Fortunately, we can quantify it in the stock market using a tool called the relative strength index (RSI). In a correction, when the RSI falls below 40, prices usually begin to form a bottom, and we get a bounce from investors buying the dip. We want to see some power after that initial bounce with a momentum reading above 60.

It was that strong momentum last November when the RSI powered through the bright green hurdle of 60 that made the third attempt a successful one. That’s what we’ll be looking for in the coming days, weeks, or months. I’ll be sure to keep you posted.

Until then - trust the long-term trend,

Brian Bond, CMT

When it comes to golf and investing, there's no shortage of similarities. There are things you can control like the clubs you choose to bring, the balls you use, the shoes you wear, and the courses you play. But many elements are out of your control like the weather, the wind, the cut of the grass, and the trees. Investing is very similar; there are things you can control and things you can't. This is a guide to help you focus on the things you can control.

The Tools

First and foremost, think of your golf bag as your investment portfolio. Your bag contains all the tools you'll need to get you through the many conditions you'll encounter.

You've got your clubs, balls, tees, umbrella, towels, gloves, and a couple of cold beers. In your investment portfolio, you can create a diversified mix of asset classes such as US stocks, non-US stocks, bonds, commodities, ETFs, index funds, and cash to help you weather any storm.

The Conditions

Then there's the course you're playing. Are the fairways long and wide or short and tight? Are there trees, water, sand, or tall grass to contend with? Has it rained recently, or are the greens dry and firm? Before you tee off, it's wise to consider all of these factors. This will help you formulate a game plan for the day and hopefully give you an edge against your competition.

Investing is no different, and there are many questions you can ask to get a sense of the current market conditions. Like has the market recently hit all-time highs or recently crashed? Are interest rates falling or on the rise? Is inflation hot or cold? Is the US Dollar strong or weak relative to other major currencies? Have profits been strong or is the economy in a slump? Is the unemployment rate rising or falling? As an investor, it's wise to consider all of these factors before teeing off on your next investment.

The Strategy

Last but not least, your success will be determined by your strategy and execution. If the first hole is a 370-yard par 4 with a massive sand trap 250 yards out, do you hit a driver off the tee and plan to hit a wedge to the green, or play it safe with a 3-iron and plan to hit a 7-iron to the hole?

Next, you're on a 500-yard par 5. Do you attack the green in two and play for a birdie? Or do you take the more conservative approach and lay up, ensuring you'll have better odds of staying in the fairway and shooting par? Again, the thought process behind creating an investment strategy is very similar.

Think of higher-risk investments like high-risk golf shots. Think of lower-risk investments like short-term government bonds as safer iron shots. For success over the long term, you'll need the right combination of both. And always, always be sure you have your umbrella ready for that unexpected thundershower, just as you should always have some cash stashed away in your emergency fund.

With Masters Week upon us, it is an opportune time to start strategizing about your golf game and your investments for the upcoming season. Having the right clubs in your bag, the right assets in your portfolio, and knowing how and when to use them puts the odds in your favor of having a successful year ahead.

Thanks for reading, have a great rest of your week!

Brian Bond, CMT

The other day a friend was telling me the stock market was rigged and that it’s going to $0. I asked him if he knew how much the stock market was worth - he wasn’t sure. So I said what if it was worth $10 Trillion, would you still think it’s going to $0? He said probably not because that’s a huge amount of money.

Well, what about $109 Trillion? Because as of the end of October 2023, that is how much the global stock market was worth. And today, it’s likely much higher after the massive rally we’ve experienced over the last few months. If it’s rigged and going to $0, we probably have much bigger problems.

Out of that $109 Trillion, which countries or regions make up the biggest piece of the pie? That would be the United States - by a long shot. The US stock market makes up nearly half of the value of the entire global stock market due to massive companies like Microsoft, Apple, Nvidia, Amazon, Google, and Meta, which as of today are all worth well over $1 Trillion.

For comparison, there is only one publicly traded company outside of the US worth over $1 Trillion, the oil giant Saudi Aramco in Saudi Arabia. Europe, China, Japan, and India do not have any.

Has the US always made up this much of the global stock market? For the past 10 years it has, but 2023 was a bit abnormal.

Between 2014 and 2022, the US’s average slice of the pie was 38%. In 2023, however, it shot up to 44.9% after the release of ChatGPT and the hype, hopes, and dreams around Artificial Intelligence powered by US corporations.

This brings us to the next question - is 45% a sustainable new level for the US vs. the World, or will the World markets catch up and bring the US back on trend? Let’s see what the charts are telling us.

This Year

The chart above shows the performance of the five largest global stock markets in 2024. We’re only two and a half months in, but interestingly, the US (SPX) is trailing Japan (NKY) and Europe (SX5E). And while Japan, Europe, and China’s (SHCOMP) trendlines are pointing up and to the right, the US’s trendline is starting to turn down.

So what does that mean for the future - and your investment portfolios? Well, perhaps the World markets are starting to catch up and will continue to gain traction vs. the US - only time will tell, but this is why I advocate for globally diversified portfolios.

As always, simply looking at the charts and the directions of the trends can help us prepare for potential outcomes and leverage the strongest trends as they start to take hold.

Thanks for reading!

Brian Bond, CMT

Homebuying season is back! Open houses have begun, and it appears that mortgage rates may have peaked after three years of relentless increases. Which brings us to the all-important question:

I live just outside Boston, MA, so I am using Northeast home prices as my examples. Right now it’s a very challenging housing market. I don’t have any hard data, but from my observations, I can tell you that buying a starter home in Greater Boston can easily cost you half a million dollars. There aren’t many homes for sale which is likely due to the large number of people who locked in low mortgage rates before 2022 and don’t want to, or can’t afford to, give them up. So where are mortgage rates now?

Mortgage Rates

The chart above shows how 30-year and 15-year mortgage rates have fluctuated over the past year. As of now, it appears rates peaked (hopefully for good) back in October 2023, with the 30-year fixed rate topping out at 7.79%.

Today the 30-year mortgage rate is 6.88%, which in dollar terms means that if you borrow $100, you need to pay back $106.88. So using that as our benchmark, let’s see how much home we can afford.

Down Payments

When you buy a home one of the most important decisions you have to make is how much money to pay upfront, called the down payment. The more money you put down, the less you have to borrow. Some people like to put down a large amount to reduce their monthly mortgage payments, and some like to put down as little as possible for various reasons. Like most things in personal finance, it’s personal.

If you put down less than 20% however, you will have to pay private mortgage insurance (PMI), which can be costly. So for our examples, we will use 20% as our down payment on each home.

Monthly Mortgage Payments

This brings us to the monthly mortgage payments. These are the amounts that would be due every month on a 30-year fixed-rate mortgage with a 6.88% interest rate at each price point.

What these amounts do not include, however, are real estate taxes, insurance, maintenance, and in some cases association fees, which can all vary drastically by zip code and will likely increase every year.

Buying a home is one of the biggest, if not the biggest, financial decisions you will ever make. There are a lot of factors that need to be considered in a very short amount of time. It’s a high-pressure and emotional experience - no way around it. That is why having a well-thought-out game plan before you start your search can make all the difference.

If you need help creating that plan, please reach out. I’d be more than happy to help.

Thanks for reading!

Brian Bond, CMT

Big-Cap New Highs

It was another choppy, but positive week in the markets this week. For the large-cap indexes, the amount of new 52-week highs expanded, most notably in the S&P 100 Index.

$NDX - The tech-heavy Nasdaq-100 Index, made up of the largest 100 tech-focused companies, closed out the week with 20 stocks making new one-year highs on Friday.

$OEX - The S&P 100 Index, made up of the largest 100 companies in the S&P 500 finished the week with an impressive 25 stocks making new one-year highs on Friday.

$SPX - The S&P 500 Index, needs no introduction. The major US benchmark index closed out the week with 98 stocks making new one-year highs on Friday.

Mid & Small-Cap New Highs

The two other US indexes that make up the next 1,000 smaller companies in the market, the S&P Mid-Cap 400 and the & S&P Small-Cap 600 together posted 95 new 52-week highs on Friday, up from the prior week.

$MID - The S&P 400 Mid-Cap Index, made up of the largest 400 companies that come after the top 500 in the S&P 500 Index, finished the week with 51 new one-year highs on Friday - more than 12% of the index.

$SML - The S&P 600 Small-Cap Index, made up of the next biggest 600 companies after the Mid-Cap 400 Index, finished the day with 44 new one-year highs to close out the week.

Why New Highs?

The New Highs lists for each index are something I follow every day. It helps provide valuable information as to which areas of the market are seeing the most strength at any given time.

During inflection points, when index leadership can begin to change, the New Highs Lists can also help point us in the right direction.

I share the New Highs Lists every week, be sure to subscribe to Leverage Charts and follow along.

Thank you!

Brian Bond, CMT

Five years ago today, my business Leverage Financial Advisory, officially opened its doors. It’s been a roller-coaster ride of a journey, and I’d like to share some history with you alongside the chart of the S&P 500 below that goes back to 2017.

I have always been good with money. I had a business professor in college who would say, “Money is a sixth sense” - and that made total sense to me, but when I looked around the room some students always seemed a little spooked.

As I went into the work world after graduation I began honing my personal finance skills. I created my own process for saving, investing, tracking, and growing my net worth. I always knew I wanted to be a financial advisor, but in my 20’s I didn’t feel ready. Who was going to listen to a kid with no money tell them what to do with their money? Nobody. So I put my time in. I sacrificed. I invested every dollar I could in the stock market and in real estate. I asked a million questions to every successful person I came across. And when I entered my 30’s, it began to pay off.

That old quote, “Money is a sixth sense” - always stuck with me. As I matured I realized that not everyone feels that way, or has that sense, and they need help. It was around that time that some co-workers and close friends began asking me for help organizing their finances, and I loved it. I showed them the process I had created years ago that had worked well for me, and they were able to implement something similar that could work for them. That’s when the lightbulb went off, and when I began the long journey of creating Leverage Financial Advisory.

Today, I am incredibly grateful to be doing something I am truly passionate about. Thank you to all of my loyal clients and supporters, and a special thank you to my beautiful wife, who has sacrificed tremendously to help me turn this idea into a reality - I couldn’t do it without any of you.

My Favorite Chart

If you asked me to choose one chart, this is it. It comes from personal finance writer Grant Sabatier, and in my opinion, it’s perfect. It hits on every phase of life, for all ages and stages. Nothing needs to be added, and nothing should be taken away.

Identify your current level. Identify the level where you want to be, and create a plan to get there. It’s that easy, and that hard - such is life.

Thank you for reading!

Brian Bond, CMT

When I was a senior in college I took a personal finance course taught by a financial advisor. Without a doubt, that class had more of an impact on my life than any other class I ever took. I remember him saying that if you prioritize saving and investing $500 a month you would be a multimillionaire. He then showed us the difference it would make if you waited to begin.

The amount was remarkable - I was sold. That class changed my life, and I believe that consistently saving and investing can change yours too.

To calculate how much you will have in the future based on your monthly investment plan, here’s a free compound interest calculator from Investor.gov.

Weekly Stock Market Update

After five positive weeks in a row, the S&P 500 broke its winning streak last week with a minor decline of -0.42%. The chart above is one I will be sharing every week. The black line is the S&P 500 Index. The red and blue lines are called simple moving averages (SMAs), which I use to identify mid-term and long-term trends.

As of Friday’s close, the S&P 500 remains above both moving averages, however, it’s worth noting that when it gets too far above these moving averages, it might be a sign that the waves are topping out in the short term. We don’t know if or when that will happen, and it’s nearly impossible to predict, but leveraging the charts can help us prepare.

Thank you for reading and have a great week ahead!

Brian Bond, CMT

Simple Moving Averages

A simple moving average is a way to smooth out fluctuations in data, like stock prices. It adds up the values over a specific period, like 50 days, then divides by that period. It helps show trends and reduces noise in the data for easier analysis.

Imagine you are a surfer, when is the best time to go surfing? 

High tide, when the waves are firing! That is how I like to think of the moving averages. If the stock market is an ocean of money, the moving averages help identify the investing conditions.

The 200-Day Moving Average (MA) is the number one most important indicator I use. It helps identify the long-term trend - up or down. I think of the 200-MA as the tides in the ocean. Above the 200-MA is high tide, and below it is low tide.

The 50-Day Moving Average (MA) is my second most important indicator. It helps identify the shorter-term trend. I like to think of the 50-MA as the waves in the ocean. Above the 50-MA the waves are popping, below it, it can be a choppy mess.

We Can Use History As a Guide

Another reason why I like using moving averages is because we can use past data to provide us with objective, factual, and often very useful information. Here’s an example: Look at the information we get by answering this simple question - In the past, how did the S&P 500 Index perform three months after it extended more than 12% from its 200-day moving average?

Here are the results from the last 20 years:

This happened only 13 other times.

13 out of 13, there was a short-term decline.

On average the decline was -5.36% around 27 days after the S&P 500 extended 12% beyond its 200-day MA.

And after three months (63 trading days), the average gain was 0.75%.

Now does this mean it is going to happen again exactly like this? No, but it provides us with real data on how investors behaved when the S&P 500 hit these levels in the past, which we can then use to prepare for potential outcomes and manage expectations.

Thank you!

Brian Bond, CMT

Big-Cap New Highs

It was a choppy week in the markets, and today all major US indexes finished in the red. For the large-cap indexes, however, there were still a good amount of new 52-week highs, most notably in the S&P 100 Index.

$NDX - The tech-heavy Nasdaq-100 Index finished the day with 9 new highs. Since January 22nd, there has been a trend of fewer new highs in this index.

$OEX - The S&P 100 Index, made up of the largest 100 companies in the S&P 500 finished the day with 14 new highs. That is the third consecutive day with more new highs for this index.

$SPX - The S&P 500 Index, needs no introduction. Today there were 63 new highs in the most followed stock market index in the world.

Mid & Small-Cap New Highs

The two other US indexes that make up the next 1,000 smaller companies in the market, the S&P Mid-Cap 400 and the & S&P Small-Cap 600 together posted 78 new 52-week highs today.

$MID - The S&P 400 Mid-Cap Index, made up of the largest 400 companies that come after the top 500 in the S&P 500 Index, finished the day with 41 new highs - more than 10% of the index.

$SML - The S&P 600 Small-Cap Index, made up of the next biggest 600 companies after the Mid-Cap 400 Index, finished the day with 37 new 52-week highs.

The New Highs list for each index is something I follow every day. It helps provide valuable information as to which areas of the market are seeing the most strength at any given time.

During inflection points, when index leadership can begin to change, the new high lists can also help point us in the right direction.

I’ll be sharing the New Highs for each index regularly, be sure to subscribe and follow along.

Thank you!

Brian Bond, CMT

Happy Valentine’s Day! The chart above is from The Economist and highlights the 5 most expensive cities in the world, for dinner for two. Not surprisingly, New York City gets the top spot in the US, with a dinner date coming close to $600.

What stands out to me, however, is how inexpensive a bottle of wine is in both Shanghai and Paris - good to know for future travels.

What do Valentine’s Day and the stock market have in common?

Initially, I had nothing, so I leveraged technology and turned to ChatGPT. Here’s what artificial intelligence had to say:

“Valentine's Day and the stock market, seemingly unrelated, share unexpected similarities. Both involve emotions, unpredictability, and the potential for gains or losses.

Managing relationships and portfolios both demand careful planning, risk management, and adaptability. Just as couples navigate the complexities of love, investors navigate the complexities of financial markets.

Surprises are inherent in both realms. Couples speculate on the success of romantic gestures, while investors speculate on stock performance. Uncertainty adds an element of risk and excitement to both Valentine's Day and the stock market.

Despite their apparent differences, love and financial investments intersect in the realms of emotions, risk, and unpredictability. Valentine's Day and the stock market remind us that navigating relationships or investments requires a blend of strategic thinking, adaptability, and a willingness to embrace the unexpected.”

This week’s unexpected: Inflation came in hot

On Tuesday morning the monthly inflation data was released and the readings were higher than expected. The chart below shows that the stock market wasn’t pleased with the results. Immediately after the release the market sold off, which you can see in the big red bar called a “candlestick”, which represents the 30 minutes of trading between 8:30 am - 9:00 am.

The S&P 500 continued to decline throughout the day, finishing down -1.37%. Not great, but perfectly normal after some less-than-perfect news.

Just like in successful relationships, investing in the stock market requires a long-term commitment. There will be ups and downs like we’re experiencing this week, but it’s how we handle those ups and downs that makes all the difference.

Thanks for reading, have a great day!

Brian

Today I turn 39, and I am very excited to bring you Leverage Charts, a newsletter designed to inspire, motivate, and provide valuable personal finance and investment education in a simple, visual, and easy-to-follow format.

If you are wondering why you have received this email, it’s because you’re either a family member, a friend, a client of Leverage Financial Advisory, a former colleague, a former classmate, a former student of mine at Boston University, or someone who at one point inspired me to “give it a shot.” If you do not wish to receive this newsletter, you can easily unsubscribe - no hard feelings…but it is my birthday, so maybe wait until next week.

To kick things off let’s start with Super Bowl LVIII! If you think prices at the grocery store have been high, they don’t even come close to a spot at the big game on Sunday. The average ticket price is nearly $10,000 - up 70% from last year’s average price and well above the most recent record high in 2021! I would take this as a sign that the economy is humming right along.

Stocks

If you’ve looked at your 401K recently, you likely felt pretty good when you logged on. The S&P 500 Index, often referred to as "The Stock Market" in the media, is made up of the 500 largest publicly traded companies in the United States.

In the last 100 years, the S&P 500 averaged about a 10% gain per year. So far, just six weeks into 2024, it’s already up 5.38%. And going back a couple more months, it’s up a remarkable 14 out of the last 15 weeks! According to one of my favorite Wall Street analysts, Ryan Detrick, a run like that hasn’t happened since March of 1972 - 52 years ago.

So what comes next? That will always be the million-dollar question, and unfortunately, nobody knows. But if you look at the chart above you will see a red line called the 200-day moving average. This is an indicator that I use religiously in my investment management process.

The 200-day moving average takes the closing prices of an index, ETF, or stock for the last 200 days, adds them up, and then finds the average price for the last 200 days. This is called a "moving average" because every day it gets updated with yesterday's closing prices, and drops off the 201st day's data.

If the price of a stock that you are tracking is above its 200-day moving average, by definition it’s in a long-term uptrend, as it shows that its price has been rising steadily over the last 200 days.

As of last week, the S&P 500 was trading 12% above its 200-day moving average. In the last 20 years, this has happened 13 other times. Here’s what happened 3 months later:

The returns were positive 62% of the time, with an average gain of +0.75%. 13 out of 13 times, however, there has been a decline. The average decline was 5.36%, around 27 days later.

So what does this mean for you as an investor? It means that in the past when the stock market has hit these high levels there have been some ups and downs over the next few months. Does it mean history will repeat? Not necessarily, but we can use history as a guide to help us prepare for what could be ahead, and leverage any opportunities that may present themselves.

Thank you for reading, much more to come!

Brian