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 [...]

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 [...]

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 [...]

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 [...]

Monthly Outlook: February 2022  Markets are off to a very soggy start in 2022. The S&P500 is off 5.3%, the NASDAQ is down 8.7%, and even bonds lost 2.1%. Why? For the past two years, markets have been rallying in a stimulus bubble, created by the Federal Reserve (Fed) and Congress, who collectively pumped an extra $6 trillion into the markets. Last month, the Fed told us that they would steadily take away their monetary stimulus and Congress hasn’t passed any bills to provide additional stimulative programs. Those two factors were enough to make addicted markets shudder in withdrawal. For a while now, we’ve noted that stock markets have been over-valued, trading at 100-year high valuation metrics. We’ve also consistently noted that valuations are a very good predictor of 10-year subsequent returns but are not good at predicting short-term returns. Momentum or “trend” is what drives short-term returns. And for [...]

Monthly Outlook: January 2022  Goodbye 2021 and hello 2022! We’ve all heard the ancient curse, “May you live in interesting times.”  Well, 2021 was interesting, at a minimum! Surely this new year will be better than the last two years and the world will get back to living “normally,” whatever that means now. But didn’t we say that a year ago? Good grief. Let’s just be thankful for what’s good in the world. It’s tempting to make overly confident predictions for 2022 like everyone else, but I think we can do better. Based on the inaccuracy of most predictions, it’s probably more profitable to learn from history and apply the lessons to our investing strategy. I can think of three lessons that might be very timely and useful for 2022. First, valuation is a great long-term predictor of stock market returns, but not a very good short-term predictor. One of [...]