Monthly Outlook: December 2022 The U.S. economy is not yet in a recession. But it is getting closer. In the meantime, markets have been zig-zagging lower as investors await clarity on the “Will We – Won’t We” question on recession. The market (S&P500) is down 13.2%, YTD, and we haven’t even started the recession, officially. Plus, investors have endured a lot of volatility along the way. The S&P500 has “zigged” four times (-12%, -17%, -12%, -16%) and “zagged” four times (+11%, +8%, +17%, +13%) to get to that -13.2%, YTD result. As we start December, markets are in a “zag” uptrend and trying to move higher. As more economic data is released and the Federal Reserve’s tightening program evolves, investors will become more certain about the outlook and more sustainable price trends will develop. But which direction? Our trend-following investment strategy (iFolios®) requires us to be invested on the right [...]

Monthly Outlook: November 2022  Markets had a decent “bear market rally” in October. The S&P500 gained 8.1%, the NASDAQ rebounded 4.0%, and international stocks added 5.9%. These are hopeful signs until you realize that all three markets are still down 17% to 29%, YTD. Much of the rally was sparked by speculation that the Federal Reserve might be ready to “pivot” on their rapid rate-hike program, and move to a slower pace and maybe even a holding pattern. The Fed has already raised Fed Funds from 0% in March to 3.00% today, and most likely to 3.75% this week. Markets anticipate another 0.75% or 0.50% at the Fed’s last 2022 meeting in mid-December, putting Fed Funds at 4.25% to 4.50% by year end. All of this is baked into the market today. The question is, What then? Will 4.50% be enough to quell inflation and signal “enough?” That’s the hope [...]

Monthly Outlook: October 2022  We’ve avoided a lot of the market decline this year by avoiding stocks. That sounds simple or obvious, perhaps, but it’s a big decision that most money managers won’t make. Our iFolios strategy is a trend-following strategy with rules-based signals that tell us when to buy for growth and when to sell for protection. Following our signals, we have been massively underweighted stocks for the past six months. As a result, we’re beating market benchmarks by 10% or more, YTD. As we sit in protection mode, our managed portfolios are moving sideways as the markets, and buy-and-hold portfolios, gyrate lower. Federal Reserve Chairman, Jay Powell, looked right into the camera after their most recent Board meeting on September 21st and told us that the Fed will use its tools to act as a brake on the economy and quell inflation. At least, that’s what we thought [...]

Monthly Outlook: September 2022  The two-month bear market rally came to an end in mid-August. It was nice while it lasted and gave the “buy & hold” crowd some hope. But the Federal Reserve Board (the Fed) poured cold water on the market by clarifying their commitment to fight inflation through tighter monetary policies. We’ll discuss the Fed and their plan later in this Outlook. But first, let’s review the markets. The U.S. stock market is down 16.2%, YTD, and the international stock market is down 19.8%, YTD. Bonds aren’t helping, either, with losses of 10.8%, YTD. Critically, nearly every market is below its 200-day moving average trendline, implying continued downtrends and the need for protection, for now. We’re doing that and our clients’ portfolios are beating the market benchmarks by a solid margin. The irony is that the economy remains strong, even if it is weakening a bit. But [...]

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 [...]

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 [...]