After the worst December since 1932, the US equity markets turned in the best January since 1987 (isn’t that the year the market crashed 22% in one day?!?). The market was massively oversold (only 6 stocks in the S&P 500 were above their 50 day moving average). Per our previous blog posts, this condition was both emblematic of an increasingly volatile trading environment, as well as a short-term opportunity. I’m reminded of a twist on a Mark Twain quote that states, “a pound of facts is worth an ounce of emotion”.
Since mid-December, the Federal Reserve has increased their subdued and patient language, while the stock market has continued to applaud the myriad of tweets coming out of the Trump administration about how great things are going with China trade talks. While our opinion remains the same and we see no reason at the moment to deviate from our current asset allocation models, the speed of the decline in Q4 2018 as well as the speed of the advance in Q1 2019 are a bit disconcerting. As always, we will let price be our guide (not pundits or tweets or conjecture), but remain cautiously optimistic for the medium and long-term. Currently the S&P 500 is up 9% which would be a fantastic return for an entire year. The deciding factor for the next leg of the market will be dependent on skepticism of the rally remaining (bullish for the market), or overconfidence creeping into our minds (bearish for the market).
The beginning of each quarter is always especially busy for us in terms of reporting and connecting with each client, so we’ve been a bit behind on our reading recommendations. For those of you who enjoy diving further down the rabbit hole (both of you), see below.
– Adam