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Is this a market that only wants to go up? I have a small cash position that I have been reluctant to invest, but am now feeling a little foolish, thinking that with all the bad news there had to be another pullback. If the market is forward-looking, is it looking past all the bad news, and if you are holding cash right now, how are you feeling about this market that seemingly only wants to go up?
At the moment, the market is not reacting rationally. There is little positive news to drive the market upward given high inflation, Ukraine war and COVID in China. Think some $ came from bonds as they are not doing well from the rising rates. Core bonds are down over 6% YTD!
Hank is correct...nothing wrong with Cash! Don't be overanxious just because the last 2 weeks have been positive. As Sven mentioned, there will always be geopolitical risk, the Russia-Ukraine conflict is far from over and Covid is still lurking.
Even with an allocation model I feel “lost” most of the time. I can’t even begin to imagine how “winging it” might feel.
I do have discretion to play around in the 5-10% “speculative” component. That’s filled to the max 10% with (3 different) equity hedges right now - which might give some hint as to my own predisposition. There’s another 25% allocated to various fixed income products. So that leaves 65% in assets that should generate positive return.
* As always, age and circumstance should play a major role in how one allocates & the degree of risk assumed. Longer time horizons allow for greater risk.
** Also - Nobody can predict the market, although over longer periods it rises. Act on predictions (your own or others) at your own peril.
Summary: "If this rally is going to expand, we need to see the following: -The S&P 500 needs to hold above its 200 day moving average and rally from there. -Further improvement in OBV. -A decisive move above 4600."
Perhaps inflation will be tamed on its own with minimal Fed Reserve activity and improved supply chain? Maybe Ukraine conflict wont last all year 2022 or dominate the news cycle all year? Could Dr. Scott Gottlieb be right that the new variant will impact us minimally due to Omicron and vaccine status of the country? Are trillions of cash on the sidelines (heard mentioned on CNBC this week) - ready to be invested in stocks? Is Warren Buffett's recent deals a harbinger of positive market sentiment?
Consumer confidence is rising. Maybe the stock market will too.
Here’s a really “odd” way to look at it - but I do. - You’ve got a predetermined allocation model. Within that model are held set percentages of cash, bonds, equities and other assets. Those assets work together to generate an overall return. In my own mind, if the portfolio generates - let’s say 7% - over a year’s time, than everything in it generated 7% - cash included. To put it another way, those assets that generated the highest returns were only made possible because you held some conservative assets to limit downside risk - commensurate with age and circumstances. - An analogy - In NCAA play you wouldn’t say that your team’s highest scorer was responsible for a win or for your team’s standings. There may be some low scorers who excelled in blocking shots, grabbing off rebounds or getting the ball to the better shooters. All work together to produce the end result.
I don’t necessarily think the markets have bottomed. But then if they have I wouldn’t be surprised. Markets always bottom when the fundamentals and news look the worse. That has always been the case on Wall Street. March 2020 was a classic example when COVID was just in its infancy. While not needed, I would still prefer to see a strong upside/downside day on the NYSE. Something that has yet to occur. This is looking more like the 2015/16 bear/ correction bottom than the December 2019 or March 2020 bottom.
But I am also aware that bear markets are notorious for sucker rallies that reel in the unsuspecting. As we stand today though the Dow, S@P and NASDAQ are closer to their all times highs than their recent bottoms.
Comments
@Bobpa said, “ … and if you are holding cash right now, how are you feeling about this market that seemingly only wants to go up?”
How am I feeling? Stick to the allocation model. My cash is far outpacing TAIL and some other equity hedges I own.
I do have discretion to play around in the 5-10% “speculative” component. That’s filled to the max 10% with (3 different) equity hedges right now - which might give some hint as to my own predisposition. There’s another 25% allocated to various fixed income products. So that leaves 65% in assets that should generate positive return.
* As always, age and circumstance should play a major role in how one allocates & the degree of risk assumed. Longer time horizons allow for greater risk.
** Also - Nobody can predict the market, although over longer periods it rises. Act on predictions (your own or others) at your own peril.
You shouldn't succumb to FOMO during these rallies. Expect volatility on both the upside and the downside.
Summary: "If this rally is going to expand, we need to see the following:
-The S&P 500 needs to hold above its 200 day moving average and rally from there.
-Further improvement in OBV.
-A decisive move above 4600."
Inflation, Federal Reserve raising rates, Ukraine - all negative. Is the market ignoring this already forecasted news? https://www.thestreet.com/investing/why-stocks-are-ignoring-war-inflation-and-higher-rates
Perhaps inflation will be tamed on its own with minimal Fed Reserve activity and improved supply chain? Maybe Ukraine conflict wont last all year 2022 or dominate the news cycle all year? Could Dr. Scott Gottlieb be right that the new variant will impact us minimally due to Omicron and vaccine status of the country? Are trillions of cash on the sidelines (heard mentioned on CNBC this week) - ready to be invested in stocks? Is Warren Buffett's recent deals a harbinger of positive market sentiment?
Consumer confidence is rising. Maybe the stock market will too.
-
An analogy - In NCAA play you wouldn’t say that your team’s highest scorer was responsible for a win or for your team’s standings. There may be some low scorers who excelled in blocking shots, grabbing off rebounds or getting the ball to the better shooters. All work together to produce the end result.
But I am also aware that bear markets are notorious for sucker rallies that reel in the unsuspecting. As we stand today though the Dow, S@P and NASDAQ are closer to their all times highs than their recent bottoms.
Commodities & the metals started out hot this morning , but slid to flat / negative near the end.
Energy got whacked as most are aware.
The 3 major U.S. equity indexes languished all day and fell hard at the end, all down around 1.5% for the day.