July PMI Data Shows Recovery Chugging Along

We’ve written quite a bit lately about the deterioration in high-frequency data. Indicators of mobility (such as auto and air travel, commuting activity, restaurant diners, etc.) leveled off in July due to the latest wave of COVID-19 cases. The strong rebound in the job market reflected in May and June jobs data has faded, based on the increase in continuing claims reported last week by the US Bureau of Labor Statistics. Read more

Moving to the Next Phase on the Road to Recovery

The US economy has made impressive progress in recent weeks. As the economy re-opens, the way we assess the recovery has changed. In March and April, we were looking for evidence that growth in COVID-19 cases was decelerating—which thankfully it did—along with evidence that a recession was priced into stocks and that stimulus measures were sufficient to get us through the crisis. We used our Road to Recovery Playbook, shown below, to help us determine how the market was progressing in its bottoming process. Read more

Stocks Approach 2009 Valuations vs. Bonds

We rolled out our Road to Recovery Playbook at the start of the week to help investors gauge where the market is in its bottoming process. The first and most important piece of that playbook—visibility into a peak in new COVID-19 cases—remains elusive, but we hope to have a clearer picture with the next couple of weeks as containment efforts have more time to work. We continue to monitor cases daily and plan to update you on that progress regularly during this crisis. Read more

3.15.20 Bear Market Communication

I hope this finds you and your family doing well!

Part of our communication protocol is to reach out to you when the equity markets enter bear market status – down more than 20% at closing from a previously established high. We did that near the end of last week on both the Dow Jones Industrial Average and the S&P 500.  You will note that we sent a similar communication when we entered correction territory (down 10%) on February 28th. The S&P 500 needed only 16 days to go from a new all-time high, on February 19th, to a bear market, resetting the previous record of 28 days.

You may be wondering why it’s called a bear market.  The term bear market gets its name from the way a bear attacks its prey, swiping its paws downward. Similarly, the bull market, an upward trending market with an absence of a 20% decline, gets its name from the way a bull attacks, thrusting its horns into the air. The present bear market brought to an end the longest bull market in history at just over 11 years, almost to the day.  And here’s the kicker… both bull and bear markets are arbitrary, made-up numbers to fit nicely in a box so we can understand them. To me, the decline we experienced from September to December of 2018, down 19.8%, sure felt like a bear market, although it did not technically qualify.  And, neither did April to December of 2011, when the equity markets fell 19.4%.   At this point, the definitions are irrelevant. The fact is the markets are down and so are our accounts. Read more

3.10.20 The Correction Continues

I hope you and your family are well!  Yesterday, March 9th, was the eleventh anniversary of the final bottoming process of the bear market from 2007 to 2009.  How ironic that the world elected to celebrate this iconic anniversary with, you guessed it, another panic attack. Read more