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sma3: I don't understand why fund managers stay locked into positions like this, especially for "conservative" funds.
Maybe most of them don't have hedging in their prospectuses, or, as Jeremy Grantham is fond of reminding us, if they're not running behind their peers, they don't worry too much about it. I agree, it's not exactly the best thing to do to stay all long in a selloff like this has been, since January, with the pop of the mother of all bubbles.
Thanks. For the rest of us, since I had to look up, for reference, today's close are 10,737.51 and 1,674.93, respectively. Less than 1% and 2%, respectively, above June lows.
If the Nasdaq Composite and Russell 2000 close below June lows in the near future, what does that portend for markets and what is the reasoning behind this?
@Observant1, most low-tests fail like waterfalls with all major indexes collapsing on the same day or the next day. But this week+ long low-test is like water-torture. It started last week on Thursday and here we are a week later, and only DJ Transports, DJIA, SP500 have breached their lows by small amounts. If things were more normal, the more volatile Nasdaq Comp and R2000 would have been the first to breach their lows but they are quite resistant this time (although their hi-to-lo declines are larger).
One can read this in 2 ways.
First, that low-test may still fail. Then, there is quite a bit of underlying strength in the market.
Second, the last leg of decline is yet to come and that would be when Nasdaq Comp and R2000 are also taken down. Where would that go? SP500 3,500? 3,000?
Reasons can be found to support either scenario.
What is important for me is that I can add some to equities, but I want the above to be resolved one way or the other.
Strictly my humble opinion; but observing Wednesday's big positive pop in equity and bonds, shows me that there is a lot of money looking for the right excuse to buy.
OR perhaps the very large trading houses used the whack world of what took place with England's monetary policy Monopoly game currently being played.
Surely the strangest mix of events since the beginning of the year that I've know to affect investing in so many areas.
Note: the best and brightest of traders have more money than they know where to place every day. The remainder of us......be patient.
My jesting a few days ago (in response to @Derf’s question) about heaving the ship’s deck furniture and than lifeboats into the boiler to keep the ship sailing had a practical intent - possibly overlooked. The point was - as an investor’s ready cash on hand to add to riskier assets dwindles, the eventual last resort is to cannibalize other assets which are down less, selling them to buy riskier assets. Might be bond funds, allocation funds, long-short funds, an energy stock - anything thar’s still above water or has fallen less. Should the downturn last for many years, one might end up 100% weighted all in the growthiest stocks. This is not advice. It may not even make sense to most. A similar path worked for me in the ‘07-‘09 period. That was, however, by historical standards a somewhat short bear market. And, personally speaking, my time horizon was considerably longer then than it is today.
Nasdaq Comp sank past its June low (10,646) to close at 10,576.
What about R2000 still hanging at 1,665, slightly above its mid-June low of 1,650? Well, 4 of the 5 major indexes are now decisively below June lows, so R2000 is the odd ball. MOREOVER, better SC indexes such as IJR, SLY are now below their June lows.
Get ready of a down leg in seasonally bad October. But November offers hope as good seasonality kicks in Nov 1 - April 30.
@yogibearbull, as different equities are making new lows, sentiment wise, the market pundits who are bears and bulls are coalescing - Mike Wilson is starting to talk about getting closer to the bottom (and not getting more bearish) and Marko Kolanovic today seems to be looking for cover. Let us hope we are in a cyclical bear market and not in a change of regime to a new secular market.
PRSIX (“T. Rowe Price Conservative Allocation Fund”) is down 17.14% YTD after today. A good bell-weather to watch. I’ve followed it for years and have always admired the firm’s demonstrated management prowess. It’s highly unlikely the folks at TRP have started taking “stupid pills”. So, other thoughts might be entertained as to why that fund suddenly fell out of bed in the course of a short 9 months. Might be some lessons there …
@crash, Thanks for the suggestion and congrats on your port’s PRWCX size. I have a lot more room in PRWCX. BRUFX $ 500m AUM is very enticing but the constant redemptions gives me a pause.
@crash, Thanks for the suggestion and congrats on your port’s PRWCX size. I have a lot more room in PRWCX. BRUFX $ 500m AUM is very enticing but the constant redemptions gives me a pause.
I've always been an advocate for 'balanced funds'; having held such things as FBALX, MAPOX, FPACX, JABAX, and PRWCX, but, Imo, the traditional 'balance' is no longer there; what with both bonds AND equities falling. I've gone to cash plus (reduced) equities, and although problematic, cash has at least had the virtue not losing value as quickly!
Agree traditional balanced funds don't work when bonds and stocks both go down. This is an environment for long-short, alternative or managed futures funds. Those come with execution challenges too but recently have been doing better than the traditional 60/40
This has been an extremely challenging year for the traditional 60/40 portfolio. It's very rare for stocks and high-quality bonds to both be down for two or more consecutive quarters.
From Ben Carlson: "The 6 month returns for a 60/40 portfolio were in the bottom 2% of rolling returns going back to 1926. This means 98% of the time, returns have been better than what we just lived through. It was also just the 4th time over the past 100 years or so that stocks and bonds were down two quarters in a row at the same time. The last time U.S. stocks and intermediate-term bonds were both down two quarters in a row occurred in the first two 3 month periods in 1974."
Comments
Maybe most of them don't have hedging in their prospectuses, or, as Jeremy Grantham is fond of reminding us, if they're not running behind their peers, they don't worry too much about it. I agree, it's not exactly the best thing to do to stay all long in a selloff like this has been, since January, with the pop of the mother of all bubbles.
what does that portend for markets and what is the reasoning behind this?
One can read this in 2 ways.
First, that low-test may still fail. Then, there is quite a bit of underlying strength in the market.
Second, the last leg of decline is yet to come and that would be when Nasdaq Comp and R2000 are also taken down. Where would that go? SP500 3,500? 3,000?
Reasons can be found to support either scenario.
What is important for me is that I can add some to equities, but I want the above to be resolved one way or the other.
Thank you!
Strictly my humble opinion; but observing Wednesday's big positive pop in equity and bonds, shows me that there is a lot of money looking for the right excuse to buy.
OR perhaps the very large trading houses used the whack world of what took place with England's monetary policy Monopoly game currently being played.
Surely the strangest mix of events since the beginning of the year that I've know to affect investing in so many areas.
Note: the best and brightest of traders have more money than they know where to place every day. The remainder of us......be patient.
you said..."be patient"
+1
https://www.cnbc.com/2022/09/29/stock-futures-are-flat-following-thursdays-broad-sell-off.html
June-low-test has also FAILED.
Nasdaq Comp sank past its June low (10,646) to close at 10,576.
What about R2000 still hanging at 1,665, slightly above its mid-June low of 1,650? Well, 4 of the 5 major indexes are now decisively below June lows, so R2000 is the odd ball. MOREOVER, better SC indexes such as IJR, SLY are now below their June lows.
Get ready of a down leg in seasonally bad October. But November offers hope as good seasonality kicks in Nov 1 - April 30.
CDs and treasuries are climbing every week.
suggestion: BRUFX. it's even down a little bit less than prwcx, ytd.
https://www.morningstar.com/funds/xnas/mapox/quote
It's very rare for stocks and high-quality bonds to both be down for two or more consecutive quarters.
From Ben Carlson:
"The 6 month returns for a 60/40 portfolio were in the bottom 2% of rolling returns going back to 1926.
This means 98% of the time, returns have been better than what we just lived through.
It was also just the 4th time over the past 100 years or so that stocks and bonds were down two quarters
in a row at the same time.
The last time U.S. stocks and intermediate-term bonds were both down two quarters in a row occurred
in the first two 3 month periods in 1974."
Link