Monthly Archives: June 2021

Let’s look at how supply and demand affects the price that investors are willing to pay for stocks. As we enter in the days of summer, I have been reminded how much supply and demand truly impacts the way we live. The principles of supply and demand are really the core of how our economy exists. If there is a shortage of something that is desirable, the price people are willing to pay for it will rise. Conversely, if there a large amount of something that no one is really interested in buying that price will fall. We have seen a myriad of examples of supply and demand lately. Remember how much cans of Lysol were selling for on Ebay in April 2020? How often can you sell a used car for more than you purchased it for? Thanks to a worldwide semiconductor chip shortage, auto manufacturers cannot make cars fast enough to keep up with the demand. The housing market is currently experiencing a significant price boom thanks to supply and demand. Post-pandemic moves to suburban neighborhoods combined with low inventory and ultra-favorable mortgage rates has set up a real estate frenzy.

Supply and demand also directly affects the price that investors are willing to pay for stocks. When there are more buyers than sellers for a stock, the price will rise. Conversely, if there is a flood of sellers and low inventory of buyers the price for a stock will fall rapidly. The stock market sentiment is currently in a “buy more at any cost” mentality. There seems to be a never-ending demand to buy more stocks. This is due in part to the Federal Reserve continuing to “hold the market’s hand” through its assurances of continued low rates and QE intervention (when the federal reserve purchases government bonds in order to inject money into the economy to expand economic growth). We have seen a “market mania” these past 12 months as stock market valuations continue to skyrocket well beyond their fundamentals. Market greed levels in many measurements are at all-time highs. Investors insatiable appetite for more has also resulted in previously thought “dead” stocks like Gamestop and AMC soaring well beyond what an expected valuation would be. It really was the perfect example of how supply and demand can snowball when perceived demand is present. Investors believed that the current price of the above stocks would continue to rise, at least temporarily. Therefore, stock prices were driven higher and higher as more people wanted “in”. The only issue is that eventually supply takes over and if the buyers suddenly decide to sell, the run for the exits can be quite dramatic. Remember for every seller, you will need to find a willing buyer who will dictate the price they are willing to buy for.

Supply and demand will always dictate prices in our economy and stock market, even though some cycles play out quite different than expected. The past 15 months have been anything but normal and judging by the current cost for a used Toyota, it looks like we can expect more anomalies at least for the time being.

I would like to take this time to wish you and your family a Happy Independence Day. As always, if you have questions about your current investment plan, you can always give us a call to discuss. We are happy to help.

Ashley Rosser, President

Prior to her career in the financial services industry, Ashley earned her Bachelor of Science in Nursing from Cedarville University.

Ashley decided to make a career change from her ten years within the healthcare industry as a pediatric emergency room nurse to retirement and 401K investment planning. She joined Victory Wealth Partners in 2008 after obtaining her Series 65 professional financial license and went on to earn her AIF (Accredited Investment Fiduciary) professional designation from the Center for Fiduciary Studies.

Happy first week of June! I always look forward to the welcome change that June brings as school finally lets out, the weather turns warmer, and the days finally get longer. It always feels like the new beginning of something great. As the weather changes, it is a good time to determine if any updates should also be considered in your investment portfolio. The stock market also experiences changes regarding what areas are moving in and out of favor. It is important to recognize when your allocations are no longer working to your benefit. Just like weeds in your garden can choke out a fruitful harvest, allowing weak performing allocations to stay in your portfolio will cause your performance to drag and creates extra and unnecessary risk. If you have areas in your portfolio that are no longer working for you may want to consider replacing them or at the very least closely monitoring them. Just because something was working well in the past does not mean it will always work well in the future.

Technology is a great current example. “ Tech is king” has really been the mantra of the market since the pandemic started last year. Well, it WAS the mantra. For the past few months there has been a visible rotation in the market away from technology into other areas like financials, industrials, and basic materials. Inflation fears coupled by the fact that many of these areas had experienced unsustainable growth for many months. We expected a temporary to intermediate cool down was likely at some point as a result. At the end of each month our investment committee does a full screening of our current fund allocations to determine if any of our holdings have become a “weed in our garden”. We have strict technical indicators that we follow so we can methodically and unemotionally execute our investment process. If a fund is no longer showing relative strength and momentum it is replaced using a new area. Most months we do not make any changes but we are prepared to act when it is necessary.

This month we are making a few updates to our holdings as we have seen a notable shift in momentum over the past weeks. We are adding in a new sector and replacing one have held for about a year. We abide by the principles of letting our winners run and cutting our losers quick. Just as our seasons change, the stock market’s areas of and strength momentum also ebbs and flows. It is important to have a clear process to follow that allows you to take advantage of increasing momentum and conversely warns you of areas that are weakening. We tell our clients that you should always know why you own the positions you hold. They should have a specific purpose and you should also be willing to cut them loose if they stop fulfilling that purpose. If you are an investor and its been some time since you tended to your investment garden, we would be happy to help you take a look and see if you should consider doing any weeding in preparation for the summer months. We are always happy to help. Have a wonderful June!

Ashley Rosser, President

Prior to her career in the financial services industry, Ashley earned her Bachelor of Science in Nursing from Cedarville University.

Ashley decided to make a career change from her ten years within the healthcare industry as a pediatric emergency room nurse to retirement and 401K investment planning. She joined Victory Wealth Partners in 2008 after obtaining her Series 65 professional financial license and went on to earn her AIF (Accredited Investment Fiduciary) professional designation from the Center for Fiduciary Studies.