Commentary
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Weathering the Ups and Downs in Volatile Markets
February will be marked in history as the month Russia invaded its neighbor Ukraine. Historically wars have surprisingly little impact on financial markets but in this case, the past may not be prologue.
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Markets are Off to a Rough Start
The Economy: Strong numbers continue to print as the US economy expands.
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2021 in Review
The Economy: The U.S. economy experienced a strong expansion throughout 2021, with consensus estimates of real GDP growth to end near 5% for the year.
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An Increasing Focus on Risk Management
Omicron: The recent rise of the COVID-19 Omicron variant poses a potential threat to economic growth, with the possibility of slowing labor market participation and intensifing supply-chain disruptions.
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Balancing Risk and Reward
In our previous commentary, we discussed the well known seasonal adage known as “Sell in May and Go Away.” The corollary to that is the “Halloween Effect,” which is the seasonal tendency for stronger equity returns during the months of November through April (illustrated in Figure 1).
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The September Effect
Although the stock market adage, “Sell in May and go away” is often quoted, there is another seasonal pattern that has plagued the U.S. equity markets in recent decades. The “September Effect” refers to the tendency for the month of September to exhibit weak stock market returns.
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Languishing Labor and Fed Tapering
It has been largely expected by market participants that the Fed would soon announce the start of tapering (reduction of asset purchases). However, the weak Nonfarm Payroll print on September 3rd has clouded the outlook for a taper timeline.
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Shifting Tides
As we head into the Fall, uncertainty continues to overshadow the investment landscape.
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Is Inflation Here to Stay?
In last month’s commentary, we highlighted the historically elevated level of debit balances in margin accounts. Although this metric is not incorporated into the models we employ since it doesn’t meet our criteria for being a precise timing tool, it does suggest an extreme in bullish sentiment that should give investors a reason to temper upside expectations.
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Margin Madness
In last month’s commentary, we highlighted the seasonal adage, “Sell in May and go away.” Adding to our concern this month is a bearish signal from an important measure of investor sentiment: the recent surge in the growth of margin debit balances.
