Just when everything is looking good in the markets and the economy, something has to show up and throw a wrench in the works. When the S&P 5001 hit an all-time high on May 1st, the tweeting began. And just like that, the US is flirting with a trade war with China. Since the first of May, the market has been reacting (and often over-reacting) with each tweet, both positive and negative.
Last month we suggested it “odd” that Utilities (often thought of as a “defensive” sector to own when the market isn’t doing so well) were a pocket of strength in this market. And since then, that sector is actually up for the month (Source: FastTrack Data).
Over the past couple of weeks, we’ve been slowly selling out of the stock market to reduce exposure. We believe our investment models are now positioned to be resilient if the market continues down a negative path.
This month we’re going to re-visit our chart from February 2019. We had placed Green, Blue, and Red lines on the chart to suggest zones where the market could run up to or possibly stop at and reverse. In February, the market had just hit the Blue line with the hope and/or expectation that we could reach the green line (new highs). Well, we got there, but now we’re back below the blue line with a similar conundrum – does the market bounce and go back to hitting new highs, or does it break down and hit the red line next?
Our V33 Indicator remains in “Growth” mode for the second quarter of 2019. It is interesting to note that the Large Cap growth index is holding up better than the major US indexes. But quarter-to-date, it’s nearly unchanged (Source: FastTrack data). However, if the quarter were to end today, we’d be looking to get back into safety mode.
Bonds – The Aggregate Bond index (AGG) continues to be strong this year, currently up 4.36% YTD (ishares.com). We still find this interesting, given the eventuality of raising interest rates. But with the Federal Reserve reversing course from speaking about raising rates this year to, instead, lowering them, who knows where they will end up in the near-term.
Hope you are having a great spring and congrats to all the new graduates!
1 The Standard and Poor’s 500 is an unmanaged, capitalization-weighted benchmark that tracks broad-based changes in the U.S. stock market. This index of 500 common stocks is comprised of 400 industrial, 20 transportation, 40 utility, and 40 financial companies representing major U.S. industry sectors. The index is calculated on a total return basis with dividends reinvested and is not available for direct investment.
2 Charts are for informational purposes only and are not intended to be a projection or prediction of current or future performance of any specific product. All financial products have an element of risk and may experience loss. Past performance is not indicative of future results.
3 V3 is a proprietary indicator developed by Shadowridge Asset Management, LLC. Its objective is to take several market sentiment factors and project how to view US stock market investment in the following quarter: for Safety, for Balance, or for Growth.