The following chart and table shows the performance of The 12% Solution for 2023 YTD (through April 3). Our benchmark for this post is SPY, the popular ETF that mirrors the S&P 500 index.
Looks like we're beginning to see some outperformance for the year. Let's get the details... The following chart and table shows the performance of The 12% Solution for 2023 YTD (through March 1). Our benchmark for this post is SPY, the popular ETF that mirrors the S&P 500 index.
Looks like both our strategy and the S&P 500 are neck-and-neck for the year. Let's get the details... Last Friday’s panic selloff (the Dow crashed and burned 905 points, with all the major indices down between 2% and 4% for the day) was a stark reminder that the COVID-19 virus and variants remain one of the biggest risks to the market, and will likely continue to inject volatility well into 2022 and possibly beyond. In the face of a bizarre mass exodus of workers from companies big and small across the land, it’s been heartening to see the CEOs of those same companies taking phone orders, working the registers, slapping beef patties around on the grill, and mopping the retail floors at night. Wait—what? I have got to turn off that Facebook news feed. On Monday September 20, the Dow plunges 600 points. Money rushes into Treasuries, and they soar. All the talk on business channels is about the debt-bloated Chinese property developer Evergrande. The eminent collapse of that company threatens to reverberate across the globe. Real estate is in peril, financial institutions are in peril, stocks are in peril, the relationship between mother and child is in peril. And then a funny thing happened. A new day dawns, and mother and child are just fine thank you. Dichotomy (noun): a division into two especially mutually exclusive or contradictory groups or entities. I’ll explain in a moment. But first, for those investors who believe that the Fed’s easy monetary policy over the years is responsible – at least in part – for the long bull market in equities, you’ve been handed more time for the animal to run. At last Friday’s Jackson Hole Economic Symposium, Fed Chair Powell laid out the case for slowing the Fed's $120 billion in monthly bond purchases. But he offered no firm time table and repeated the central bank's view that the so-called 'tapering process' should not be linked to future rate hike plans, which aren't likely to begin until early 2023. Every pundit with a pulse was expecting a taper timeline. By staying quiet on that, the Fed stepped out of the way of a continuing rally. This time last month, it looked like COVID-19 was rapidly become a thing of the past. But the virus had other plans. With the rise of the ominous Delta variant, hospitalizations (and deaths) have begun to spike once again, especially in those areas with low vaccination rates. While I certainly don’t expect to see a return of the lockdowns of 2020 (at the height of restrictions in March and April of 2020, more than 310 million Americans were under directives to “shelter in place” or “stay at home”), a patchwork of new and untried directives – from both public and private authorities – is beginning to shape how we’ll move forward in the near term. You’ve heard the cries from employers across the country: nobody wants to work anymore. With ‘help wanted’ signs plastering windows and the old classified sections surging with unfilled positions, some business owners and politicians would have you believe that America has lost its work ethic. "The government pays people big bucks NOT to work,” says U.S. Representative Mo Brooks, Republican from Alabama, referring to the current administration’s $300 weekly unemployment supplement. “So they don’t!" U.S. Representative Ro Khanna, Democrat from California, offers another take. If you’ve been invested for at least a couple of years, you’re familiar with the old Wall Street adage, “Sell in May and go away.” It refers to the period between May and October when the market - on average - underperforms the prior six months. The adage suggests you’d be better off in cash from May to October.
Like all proverbs, maxims, and saws, there is a grain of truth in there somewhere. Indeed, history clearly shows the market’s strongest six-month period is November to April. History also shows September to be the most active hurricane month. Does that stop people from going to the beach that month? Not the beaches I try to book for a vacation. Why? It’s going to be something. All at once, millions of us, perhaps billions, coming out of the darkness into the light. Breathing the fresh air. Spreading our wings after cramped confinement. Issuing forth a great and thunderous buzz, an affirmation of life. I can almost see myself out in the back yard, on the trunk of the greening maple tree, wings flapping like the devil trying to attract a comely, bug-eyed…
Wait. What? Well, there I go again, letting the animal spirits in the marketplace get the better of me. I’m not a cicada, I keep telling myself. But it’s hard not to relate. Sure, the Brood X periodical cicadas have been cowering underground for the past 17 years while we’ve had to endure but a year of it, hiding behind locked doors and windows or glaring out from behind masks when we do venture out. But now the brood has begun their emergence throughout 15 states in the Eastern U.S., eager to get on with life. And so too, we pandemic-stricken humans. |
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May 2024
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