What if Inflation Is Hard to Crack?

Monthly Outlook: August 2022  Markets enjoyed a solid bear market bounce in July. U.S. stocks rallied 9.2%, international stocks were up 3.4%, and even bonds rose 2.4%. This was the third rally of 5% or more since the market downtrend started in January 2022. The other rallies proved to be short-lived, and we expect this one to be, too, unfortunately. Even with the July bounce, markets remain downtrending with U.S. stocks down 14.0%, international stocks down 14.6%, and bonds down 8.2%, YTD. For investors that haven’t reduced their risk and trimmed stocks, we’d recommend selling this rally. The July rally was a bit odd considering the weak economic news that was released. GDP for the second quarter fell -0.9%, following a -1.6% decline in the first quarter. Although two consecutive quarters of declining GDP is only a shorthand estimate of recession and doesn’t confirm one, it is a good clue [...]

August 1st, 2022|

What Do Market Bottoms Look Like? Not This.

Monthly Outlook: July 2022  Our iFolios growth portfolios beat their market benchmarks by 4% to 5% in June. We did that by not losing (much). Since January, when nearly every market turned from uptrend to downtrend, we’ve been selling and raising a lot of cash. We simply followed the trends and invested accordingly. We didn’t guess or predict, and we didn’t fight our signals. As we start the second half of 2022, the trends remain firmly downtrending and so we remain resolutely in protection mode. Markets have been remarkably weak this year, so far. The S&P500 is down 19.9%, the NASDAQ is down 29.3%, and international stocks are down 18.8%. Even bonds have lost 10.3%, and that includes interest. Cash, paying next to nothing, is a far better temporary holding than nearly any other market. With markets down so much, many investors are tempted to believe that we’re somewhere near [...]

July 1st, 2022|

Buy the Dip? We Wouldn’t.

Monthly Outlook: June 2022  What a long, strange trip it’s been this year, already. The peak for the S&P500 was on the first trading day of the year, January 3rd, and it’s down 12.8%, YTD. As unsettling as that is, it doesn’t tell you how we got here. The daily volatility has been remarkable – in both directions. We’ve seen 11 days where the market dropped over 2% (and several over 3%). But we’ve also seen 11 days where the market gained over 2%. If you’ve sensed the U.S. markets have been wild this year, you’re not imagining it. Other markets have been weak, also. International stocks are down 11.0%, and Bonds are down 8.8%. The only positive market is Commodities, with a YTD gain of 38.7% (thanks mostly to oil, which is up 52.9%). The semi-good news is that we’re beating market benchmarks easily, this year, and with a [...]

May 31st, 2022|

Forecast vs Nowcast

Monthly Outlook: May 2022  Markets are off to one of their worst starts in decades. There’s just no way to say that pleasantly. YTD, the S&P500 is down 12.9%, the NASDAQ (last two years’ favorite) is down 21.1%, and international stock markets are down 12.7%. Even Bonds are down 9.5% this year. The important thing, to us, is that the trend of nearly every market has rolled over to downtrend (below their 200-day moving average trend line), thereby triggering our sell signals. There are a couple of sub-sector niche markets that are doing ok, mostly commodities, but do you really want a portfolio of just oil and soybeans? The good news is that we’ve already sold a lot of holdings and are sitting in protection mode with ample Cash. We’re holding just 20% of our stock market targets, counting both long and offsetting hedge positions, so we’re clearly focusing on [...]

May 2nd, 2022|

Chicken & Waffles

Monthly Outlook: April 2022  It’s been a volatile ride for markets in 2022, so far. The high of the year was on January 3rd and it’s been down, up, down, and so on, for three months. The S&P500, for example, lost 10% in January, bounced back 7% in February, lost 9% again in early March, and then recovered 10% in the last two weeks of March. Importantly, it reversed trend (above or below its 200-day moving average) four times. This volatility is not unheard of, but it is rare. Investors are acting like nervous chickens and waffling in their conviction. Let’s agree to call this a “chicken & waffles” market, and it’s anything but comforting. Looking across asset classes, or markets, we see a mixed bag of trends as we start Q2. Bonds, usually held for stability and income, have been weak this year, with a loss of 5.7%, including [...]

March 31st, 2022|

Protection Mode is Prudent, For Now

Monthly Outlook: March 2022  Markets continue to be very volatile and weak in 2022. YTD, the S&P500 is -8%, the NASDAQ is -13%, the International EAFE is -7%, and even Bonds are -3%. It doesn’t feel good, and it raises a lot of uncertainty for investors. Do we buy this dip? Is this the beginning of a bear market? Is my strategy working for me? What’s my downside risk if this keeps going? The key to managing stressful times is to have a sensible plan in place before difficulty arises, to maintain perspective, and to calmly execute your plan. We moved to protection mode in January, using our rules-based iFolios trading strategy, and we’ll stay safe until growth resumes. It’s the only prudent thing to do, for now. The Stimulus Bubble The biggest news event is Russia’s invasion of Ukraine last week. The pictures of destruction and loss of life [...]

February 28th, 2022|
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