Last month we were looking at how the odds favored a positive November in the S&P 500, and so far, it looks like that is what we’re going to get. While the strong upward momentum coming out of the late September market lows has slowed, it is our hope that the S&P 500 and other major markets hold these price levels from here. But there look to be various obstacles going into the end of the year.
Our Mid-Term Cycle signal has been negative since November 15th, and since then, the market has been grinding sideways. A negative signal doesn’t necessarily mean a negative market, but it can mean that there are headwinds that will make it tough for the stock market to continue going up as decisively as it has done from the September lows.
As of Wednesday night (November 24th, 2021), our Shadowridge Dashboard showed Positive to Negative sectors as 7 to 4. That’s a pullback from the 11 to 0 we saw as the market ran upwards from mid-October to mid-November. So while there are still some signs of strength across many sectors of the market, they aren’t all agreeing as they would when the market is in a stronger trend.
For this month’s chart, I want to revisit the employment data. There has been a lot of conflicting news about unemployment being good… or bad. It really depends on who you ask. But the data, for now, confirms that the unemployment rates are still dropping. And that’s typically a good thing for the market. As long as the data on this chart continues to go down, the market and economy should be ok. If it starts to rise, then we’ll want to get very defensive for what could come from that.
Bonds – the Aggregate Bond Index AGG is at -2.33% YTD in 2021. The 7-10yr Treasury bond index is -4.41% this year. I’ve mentioned many times this year how these asset classes that are meant to be “safer” have struggled. Even the T-Bill ETF is down -0.09%. And that is considered the “Risk Free” rate in most academic market teachings. However, High Yield bonds still remain strong, being up around 1.96%, although even they aren’t as strong as they have been earlier this year. (FastTrack Data).
Bottom line – we were able to make good use of the run-up in October and November and we are now locking in those gains and going back to “playing it safe” mode until we see strength return to the market. And with “Black Friday’s” market looking a bit iffy, we’re happy to be playing defense right now.
Hope you had a great Thanksgiving holiday!!
Don’t forget to catch our monthly webinar, where I dive deeper into what I have mentioned in this newsletter commentary. For me, nothing tells the story as much as visuals, so I really enjoy the webinar for digging into what we’re doing with investment decisions. Will and Laura will also be presenting timely topics to help you face life’s financial challenges and opportunities. We hope you can join us – Thursday, December 16th at noon Central time.
You can sign up for the webinar here. We look forward to seeing you there!
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.