Our recent managed portfolio additions have been closed out due to further weakness in the equity markets. This puts us back on defense with our only sector positions being in Utilities and Staples (the things you buy at the grocery store every day). Our “Factor” positions are in Low Volatility, Hedged Equity and Momentum (which has gravitated to low volatility), and our cash positions are very high for the time being (adding to the cash we already had).
If there was a bright side to today’s action, our Gold and Bond positions had a good day, and the market didn’t “run-away” after gapping down in the morning. In fact, it felt like the selling pressure was being absorbed and the idea of the market making an “Undercut Low- Double Bottom” still appears to be in play. Maybe the institutions are starting to see value?
Defensively selling is never fun in a down market but we must honor our risk parameters and act accordingly to protect capital when the indications of risk are too high. I was once told that it’s OK to take a shot in the markets and be wrong, so long as you don’t stay wrong… Those words have stuck with me and are a constant reminder to honor our stop loss levels. Equity markets remain in a confirmed down trend with further price erosion occurring near daily- It’s time once again to exercise caution and the rarest commodity on Wall Street, patience!
Typical mid-term election years have found a bottom in the third to early fourth quarter historically and the equity markets have a history of exploding higher over the next several months. According to the Stock Trader’s Almanac, the mid-term election year lows set up “The Sweet Spot” of the four-year election cycle where, historically, the Dow Jones Industrial Average has gained 19.3%, the S&P 500 gained 20.0% and the NASDAQ has posted a return of 29.3% from the midterm year Q4 to pre-election year Q2… Of course, history is no guarantee of future results, but its nice to know what the odds are saying!
Times like these can take a toll on emotions and the longer these situations take to work themselves out, the harder they become to deal with. I have been in this business through several bear markets over the past couple of decades+. Dot com bubbles, flash crashes, hedge fund blow ups, credit crises, and most recently a worldwide health pandemic. Every one of these drivers was different, yet they all had one thing in common- They all came to an end eventually. China will reopen its economy, the Russia/Ukraine war will resolve, and inflation will moderate at some point in the future.
Global stock markets are excellent at discounting the future earnings of the corporations we purchase goods and services from every day. One day soon, the participants of these markets will see those future earnings through rose colored lenses once again and begin buying up their perceived bargains.
Should you wish to discuss the current markets, our strategy, and the tools we use to manage risk or just touch base to see how things are going, please don’t hesitate to reach out to our office @ 843-651-2030. Also, feel free to share these newsletters with your friends and family via email and visit us on our website at www.sabowealth.com or www.facebook.com/sabowealth.
Important Disclosures: Past performance is not a guarantee of future results. The statements contained herein are solely based upon the opinions of Edward J. Sabo and the data available at the time of publication of this report, and there is no assurance that any predicted or implied results will actually occur. Information was obtained from third-party sources, which are believed to be reliable, but are not guaranteed as to their accuracy or completeness.