allworth-financial-logo-color
    • Wealth Management
      • Financial Planning
      • Investment Management
      • Tax Planning
      • Estate Planning
      • Insurance Services
    • 401(k) For Employers
    • For Airline Employees
    • Our Approach
    • Why People Work With Us
    • Office Locations
    • FAQs
    • Our Fees
    • Our Story
    • Advisors
    • Our Leadership
    • Advisory Firm Partnerships
    • Allworth Kids
    • Webinars & Events
    • Podcasts
    • Financial Planning
    • Investment Management
    • Tax Planning
Meet With Us
  • Locations
  • Login
  • Contact

January 2019 Market Update

  • Share this post

Market Cycles and Feedback Loops

Do you ever feel like you’re too close to something?

Sometimes, you can be so close to what’s happening, that you can be hard-pressed to feel (or see) anything other than the chaos.

Yes, “this or that” trend may have a nice-sounding narrative, and it may even appear to be the greatest thing since sliced bread, but, sometimes, if you’re just able to take a few steps back, you may more easily see all that glitters isn’t gold.

With the New Year almost a month over, and with volatility still fresh in our minds, we thought it would be helpful to take a few steps back and see if we can’t get a better look at the long-term market environment.

Cycles

Year-after-year, whether it’s the change of seasons from winter to spring, or the change of a caterpillar into a butterfly, it’s hard to deny that cycles are all around us.

Not all cycles are related to nature, however.

There are political cycles, technological cycles, debt cycles, business cycles, and economic cycles.

With the non-natural cycles, there are a plethora of experts and opinions about where we are and where we’re going. This is perhaps most obvious as it pertains to the markets, economy, and politics.

Many expert opinions don’t seem any more scientific or contain any more actual insight than the yearly weather prediction offered by the shadow of Punxsutawney Phil (the most famous groundhog of all!)

Still, however, we need to pay attention.

What we do know is that we will have good times and bad times. We will have short winters, but also long ones. We will have economic expansions and contractions. We’ll have bull and bear markets.

With that in mind, so that we may have a better idea of what factors impact the markets, let’s look at some of the less obvious reasons that various cycles occur. 

Feedback Loops

While we know that cycles are inevitable, feedback loops are not.

Feedback loops can coincide with (or even lead) a cycle. They can be isolated to one small area (i.e. Bitcoin) or they can be systemic (i.e. the crash of ’87).

A feedback loop (outside of the scientific definition) is something that gets input or feedback from itself, and subsequently impacts itself. For example, a falling market creates volatility which then causes more selling, which, in turn, begets more volatility.

A feedback loop could also occur when asset prices rise.

A certain number of buyers help push an asset price higher. More people take notice and don’t want to miss the upswing. They jump in and the asset price moves even higher. After a while, it seems everyone knows about this secret, hot investment, and the price continues going up.

Bitcoin was an excellent example of this: a true bubble, feeding off itself in an upwardly spiraling (and later a downwardly spiraling) loop.

To be sure, not all feedback loops are amplifying. In fact, some are corrective and stabilizing.

The Federal Open Market Committee (FOMC) is meant to be a stabilizing feedback loop. When asset prices and employment and inflation are falling, the Fed will cut interest rates or engage in asset purchases (quantitative easing) to help stabilize the markets by encouraging risk-taking.

When inflation and the economy are running too hot and there are asset bubbles forming, the Fed will raise interest rates with the goal of deflating bubbles to discourage risk-taking. 

Trade Wars and Government Shutdowns

This brings us to the current trade dispute with China and the government shutdown. These two issues are clearly not cyclical, but they can be seen as smaller feedback loops that feed into the larger cycle of the economy and markets.

The trade skirmish can be looked at through a couple of different lenses. It can be an amplifying loop with negative consequences: each side adding more tariffs and/or more restrictions with both economies getting hurt.

Now, looking through the other lens—though it’s counterintuitive—means one side is willing to inflict (or absorb) some short-term pain to level the playing field, making trade more fair and intellectual property rights more enforceable.

The first way of looking at it is going to exacerbate the problem while the second way of looking at it will stabilize or correct it (though it may be a longer-term endeavor).

What about the government shutdown?

Neither side acknowledges that they might be able to compromise. The longer the standoff continues, the more negative the potential impact, possibly costing everyone more than some sort of compromise would.   

This brings us back to the Fed and where we are with rates.

If the economy is as fragile as the markets have portrayed it to be, the Fed needs to understand that markets are already self-correcting and little or no stabilization (e.g. rate hikes) may be necessary at this juncture.

Taken with the negatives of the trade skirmish and the government shutdown, the Fed correcting for an economy that is not overheating, and a market that is not rampant with asset bubbles, can all provide the market with more negative feedback and this can lead to more volatility.

We will be the first to tell you that modeling each of these out is extremely difficult. And since no one can model these things, we continue to emphasize diversification and the utilization of asset classes that we believe will contribute to lower total portfolio risk over the long term.

We may make new all-time highs in the market in 2019. We may also retest and break below the lows from Christmas Eve 2018. What we are confident of is that, eventually, like fall turning into winter, the cycle will come to an end and a new cycle will start.

One thing, however, is certain: If you’re not positive that your investments are diversified in a way that helps to protect your interests and long-term objectives, you should contact us today.

 


Past performance does not guarantee future results. Any stock market transaction can result in either profit or loss. Additionally, the commentary should also be viewed in the context of the broad market and general economic conditions prevailing during the periods covered by the provided information. Market and economic conditions could change in the future, producing materially different returns. Investment strategies may be subject to various types of risk of loss including, but not limited to, market risk, credit risk, interest rate risk, inflation risk, currency risk and political risk.
This commentary has been prepared solely for informational purposes, and is not an offer to buy or sell, or a solicitation of an offer to buy or sell, any security or instrument or to participate in any particular trading strategy or an offer of investment advisory services. Investment advisory and management services are offered only pursuant to a written Investment Advisory Agreement, which investors are urged to read and consider carefully in determining whether such agreement is suitable for their individual needs and circumstances.
Hanson McClain Advisors and its affiliates and its employees may have positions in and may effect transactions in securities and instruments mentioned in these profiles and reports. Some of the investments discussed or recommended may be unsuitable for certain investors depending on their specific investment objectives and financial position.
Hanson McClain Advisors is an SEC-registered investment advisor that provides advisory services for discretionary individually managed accounts. To request a copy of Hanson McClain Advisors’ current Form ADV Part 2, please call our Compliance department at 916-482-2196 or via email at compliance@hansonmcclain.com.
January 22, 2019

Give yourself an advantage. Sign up to receive monthly insights from our Chief Investment Officer, and be the first to know about upcoming educational webinars. You'll also get instant access to our retirement planning checklist.

Related Articles
See more articles
January 12, 2024 Fourth Quarter 2023 Market Update

Allworth's Co-CEO Scott Hanson and Chief Investment Officer Andy Stout team up for this fourth quarter 2023 market update video.

Read Now
December 15, 2023 December 2023 Market Update

Chief Investment Officer Andy Stout takes a look back on the year to help give perspective to what's on the horizon in 2024. At the beginning of this …

Read Now
November 17, 2023 November 2023 Market Update

Chief Investment Officer Andy Stout examines whether there’s a chance the US dollar will lose its status as the world’s reserve currency. There is a …

Read Now
Allworth Financial logo
Talk with an Advisor Contact us
  • Services
    • Wealth Management
    • 401(k) For Employers
    • For Airline Employees
  • Working With Us
    • Why People Work With Us
    • Office Locations
    • FAQs
    • Our Fees
    • Client Login
  • About Us
    • Advisors
    • Our Leadership
    • Advisory Firm Partnerships
    • Allworth Kids
    • Careers
    • Form CRS
  • Insights
    • Workshops & Events
    • Podcasts
    • Financial Planning
    • Investment Management
    • Tax Planning

Newsletter

Subscribe to receive monthly insights from our Chief Investment Officer, and be the first to know about upcoming educational webinars.

©1993-2025 Allworth Financial. All rights reserved.
  • Privacy Policy
  • Disclosures
  • Cookie Preferences
  • Do Not Sell or Share My Personal Information

Advisory services offered through Allworth Financial, a Registered Investment Advisor

Securities offered through AW Securities, a Registered Broker/Dealer, member FINRA/SIPC. Check the background of this firm on FINRA's BrokerCheck.

HMRN Insurance Agency, LLC license #0D34087

Rankings and/or recognition by unaffiliated rating services and/or publications should not be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if Allworth is engaged, or continues to be engaged, to provide investment advisory services.  Rankings should not be considered an endorsement of the advisor by any client nor are they representative of any one client’s evaluation or experience. Rankings published by magazines, and others, generally base their selections exclusively on information prepared and/or submitted by the recognized advisor.  Therefore, those who did not submit an application for consideration were excluded and may be equally qualified.

1.  Barron’s Top 100 RIA Firms: Barron’s ranking of independent advisory companies is based on assets managed by the firms, technology spending, staff diversity, succession planning and other metrics. Firms who wish to be ranked fill out a comprehensive survey about their practice. Allworth did not pay a fee to be considered for the ranking.  Allworth has received the following rankings in Barron’s Top 100 RIA Firms: #14 in 2024, #20 in 2023 and #31 in 2022. #23 in 2021, #27 in 2020.

2.  Retention Rate Source: Allworth Internal Data, FY 2022

3 & 9.  NBRI Circle of Excellence and Best in Class Ethics:  National Business Research Institute, Inc. (NBRI) is an independent research firm hired by Allworth to survey our customers. The survey contains eighteen (18) scaled and benchmarked questions covering a total of seven (7) topics, and a range of additional scaled, multiple choice, multiple select and open-ended question and is deployed biannually. NBRI compares responses across its company universe by industry and ranks the participating companies in each topic. The Circle of Excellence level is bestowed upon clients receiving a total company score at or above the 75th percentile of the NBRI ClearPath Benchmarking database.  Allworth’s 2023 results were compiled from 1,470 completed surveys, with results in the 92nd percentile. Allworth pays NBRI a fee to conduct the survey.

4.  As of 6/1/2025, Allworth Financial, an SEC registered investment adviser and AW Securities, a registered broker/dealer have approximately $28.5 billion in total assets under management and administration.

5.  Investment News Best Places to Work for Financial Advisors:  Investment News ranking of Best Places to Work for Financial Advisors is based on being a United States based Registered Investment Adviser with a minimum of 15 full or part-time employees working in the United States and having been in business for over a year.  Firms who meet Investment News’ criteria fill out an in-depth questionnaire and employees were asked to take part in a companywide survey.  Results of the questionnaire and employee surveys were analyzed by Investment News to determine recipients.  Allworth Financial did not pay a fee to be considered for the ranking.  Allworth Financial has received the ranking in 2020 and 2021.

6.  2021 Value of an Advisor Study / Russel Investments

7.  RIA Channel Top 50 Wealth Managers by Growth in Assets:  RIA Channel’s ranking of the Top 50 Wealth Managers by Growth in Assets is based on being an active Registered Investment Adviser with the Securities and Exchange Commission with no regulatory, criminal or administrative violations at the time of the ranking, provide wealth management services as their primary business and have a two year growth rate of 30% based on assets reported on Form ADV Part 1 at the time of ranking.  Allworth Financial did not pay a fee to be considered for the ranking.  Allworth Financial received the ranking in 2022.

8.  USA Today Best Financial Advisory Firms: USA Today’s ranking of Best Financial Advisory Firms was compiled from recommendations collected through an independent survey and a firm’s short and long-term AUM growth obtained from public sources. Allworth Financial did not participate in the survey, as self-recommendations are prohibited from consideration, and all surveyed individuals were selected at random. Allworth Financial did not pay a fee to be considered for the ranking. Allworth Financial received the ranking in 2024.

Tax services are provided by Allworth Tax Solutions, an affiliate of Allworth Financial. Allworth Financial does not provide tax preparation services or advice.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

Important Information

The information presented is for educational purposes only and is not intended to be a comprehensive analysis of the topics discussed. It should not be interpreted as personalized investment advice or relied upon as such.

Allworth Financial, LP (“Allworth”) makes no representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of the information presented. While efforts are made to ensure the information’s accuracy, it is subject to change without notice. Allworth conducts a reasonable inquiry to determine that information provided by third party sources is reasonable, but cannot guarantee its accuracy or completeness. Opinions expressed are also subject to change without notice and should not be construed as investment advice.

The information is not intended to convey any implicit or explicit guarantee or sense of assurance that, if followed, any investment strategies referenced will produce a positive or desired outcome. All investments involve risk, including the potential loss of principal. There can be no assurance that any investment strategy or decision will achieve its intended objectives or result in a positive return. It is important to carefully consider your investment goals, risk tolerance, and seek professional advice before making any investment decisions.