Start the conversation
No two ways about it: Investors are getting nervous. Syria, North Korea, "Frexit," Trump's stalled reform agenda, the months of relentless gains, and even the advent of the annual "sell in May and go away" phenomenon – they're all starting to weigh on sentiment, despite fundamentals just about as strong as they've ever been.
But we're not worried about our investments – the "Money Map Method" of concentrated, risk-balanced investing (with trailing stops) in powerful trends will blunt the effects of any market dips and save capital…
…and we're not worried about our trading because, like Tom Gentile will show you in this illuminating interview on current market conditions, a "rules-based" trading approach like the one we follow can make money – serious money – in any market, often in just a few days.
Here's what Gentile, our Options Trading Specialist and Weekly Cash Clock Editor, had to say to Money Morning's Managing Editor, Greg Madison, about what he's doing to adapt to the changes and make money.
Here's How the Market Is Changing
Greg Madison: Hi, Tom, thanks for stopping by.
Tom Gentile: My pleasure!
GM: Let's get right to it. For years, most of the past decade since the Fed launched QE (quantitative easing), the markets were totally focused on the Fed. They would quite literally live and die by what they thought the Fed might do, or what Ben Bernanke and then Janet Yellen would telegraph about their intentions. I mean, not that we could forget, but it got so extreme that we entered a kind of "good news is bad news" paradigm. The slightest hint that the economy was improving in any way, shape, or form would send stocks through the floor because the market was convinced the Fed would turn off the "hose" of the cheap-as-free money that was supporting stocks.
Now all that's changed. Right now it seems like the Fed could vanish into thin air or up and move the Marriner S. Eccles Building to Mars and nobody would notice they were gone. Politics seem to be driving the market now, 100%. Markets are responding with optimism over the prospect of business-friendly reforms, bolstered by an improving economy. Good news is good news again.
So my question is this: Can you remember a time when this has happened before? Is there a "template" for trading this, I mean? And do you think there are any dangers to this kind of wholesale "jumping horses" that the market has done over the past 12 or 18 months?
TG: Great question – questions. To be honest, I can't remember a time that the markets have made such a change of focus like this. The changes have been pretty striking. I remember gold, stocks, bonds, and the dollar all moving together during the Obama administration and the QE rounds in particular. If anything, markets are, if not exactly returning to "normal," then at least coming closer to their more traditional posture. Gold is a "risk-off" asset again that moves opposite the stock market, for instance.
This is, literally, nothing new, but what it does is opens up a few really, really juicy, unique opportunities to hedge and, even better, make some big profits in the event of a big move to the downside – especially with gold: There's never a bad time to own it, hardly ever a bad time to trade it, and now there's more potential with it.
GM: To continue this kind of "line" of thought, we ended 2016 and began 2017 bullish because, as I mentioned, investors were convinced that market-friendly reforms and lower taxes were on the way.
Now those efforts look to have more or less completely stalled, with no immediate prospects that they'll move forward in the next few weeks or months. And because of that change of focus I've mentioned, the markets are skittish about this.