Market Insight April 3, 2023

Here is the Market Insight for the week of April 3, 2023:

Markets Rebounded but the Blitz Index Is Not Optimistic

What is it?

As of last Thursday morning, markets were up for the week. That follows two weeks of positive price action. In early March there was a larger drop as news around banks lowered investor confidence. Below is a chart that shows the Vanguard Total World Stock Index Fund (VT) so far in 2023. This is a weekly chart so each candlestick represents one full week of price action in the markets. 

Why does it matter?

While we have bought into some investments in the last few weeks we are still playing it safe and keeping a substantial amount of our allocation in cash or money market ETFs. VT has not gained back the losses from that harsh week around a month ago. Investor sentiment may be dampened longer than that initial week of pessimism in March. 

“El-Erian, chief economic adviser at Allianz and president of Queens’ College at the University of Cambridge, warned that ‘fallout’ from the troubled banking sector was adding to the pressure on an already delicate economy. This economic contagion, which will play out over time, threatens to increase the challenges facing an economy that is dealing with inflation, a mishandled interest-rate hiking cycle, declines in personal savings, bouts of financial instability and a slowing global economy.”*

That type of market environment is in line with the Blitz Index score. As mentioned in prior market insights, the Blitz Index is a tool that suggests being anywhere from 0% to 100% invested in the markets. The Blitz index remains at a score of 0/10 and has been there for a few months now. We do not want to be fully invested in the markets as these risks continue to mount. However, we have to respect the markets as of late. With all the negativity to bring markets lower they have held up well broadly speaking. 

Crypto Gains Traction as Banks Struggle

What is it?

The below chart compares the: Financial Select Sector SPDR Fund (XLF), Bitwise 10 Crypto Index Fund (BITW), and Vanguard Total World Stock Index Fund (VT) over most of March. XLF was hit hard by the banking struggles. The market as a whole (VT) has held up alright, and BITW has gained some traction. 

Why does it matter?

While some crypto advocates are against what regulators are doing, it may be what is needed for mainstream adaptation. If there is heightened regulation, then there is a chance the cryptocurrencies will become more valuable. After the FTX bankruptcy, there is still a poor investor sentiment around cryptocurrencies. However, as investors are able to custody those assets under more reputable names, there could be a broader adaptation to cryptocurrencies in the future. 

On the other side of things, outside sources such as the government showed that they are willing to support banks or the financial industry if needed. Whether that is with greater liquidity or pauses in trading, there are systems in place to maintain investor confidence in the markets. Although that is true, we are not investing much into the financial sector at the moment. We see potential in other areas although some financial companies have performed well lately. On top of that, we have a risk off approach for the market as a whole, and would not want to put money at risk in a sector that has been underperforming as of late. 

If you are interested in our Tactical Crypto model, feel free to reach out or mention so in your next meeting. This model can invest in a select few cryptocurrency ETFs with the option to hold cash or money market investments when we are not fully invested in the crypto ETFs. 

Other articles we found interesting this week:

One of the world’s richest men knows why Silicon Valley Bank really failed: ‘People on iPhones’

Elon Musk plans China visit, seeks meeting with premier

Eyes on EU and US inflation figures on last day of Q1

Current 401(k) portfolio

Our last 401(k) portfolio reallocation: 5/19/2022. 

Want more information?

The weekly market insight provides a window into the process we use in our investment management process. At Breakaway, we believe markets are always changing and require a nimble yet data-oriented approach. 

Our process attempts to identify trends and momentum in the financial markets. With that information, we align our clients’ portfolio accordingly in the hope to help our clients accomplish their life goals while attempting to lower the risk of a large drop in their portfolio.

Click here for more details about our investment management 

Sources:

*Chloe Taylor. “Top economist Mohamed El-Erian warns that ‘erosion in trust’ caused by banking crisis will lead to ‘economic contagion’”. 3/29/2023. Yahoo Finance. https://finance.yahoo.com/news/top-economist-mohamed-el-erian-095602104.html

IMPORTANT DISCLOSURES: 

Educational use Only. The market update published by Breakaway Financial Group LLC (“Breakaway”) is intended to be educational in nature and is not intended to be a recommendation for any specific investment product, strategy, plan feature or other purposes. Accordingly, it should not be construed by any consumer and/or prospective client as solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation. 

Advertising and Marketing. Communications such as this are not impartial and are provided in connection with advertising and marketing. This material is not suggesting a specific course of action or any action at all. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, insurance, legal or tax professional that takes into account all of the particular facts and circumstances of an investor’s own situation. No person associated with Breakaway is a licensed attorney or tax professional and the information contained herein should not be considered tax or legal advice. 

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Important Information regarding Registration Breakaway Financial Group, LLC and/or Patrick Traverse offer investment advisory and financial planning services through Belpointe Asset Management, LLC, (“Belpointe”) 500 Damonte Ranch, Parkway Building 700, Unit 700, Reno, NV 89521, an investment adviser registered with the Securities and Exchange Commission (“SEC”). Registration with the SEC should not be construed to imply that the SEC has approved or endorsed qualifications or the services Belpointe offers, or that its personnel possess a particular level of skill, expertise or training. It is important to read disclosures pertaining to Belpointe Asset Management at this link https://belpointeasset.com/disclosure/.  Additional information about Belpointe and Patrick Traverse is available on the SEC’s website at www.adviserinfo.sec.gov.

Craig Stahlecker

Craig Stahlecker

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IMPORTANT DISCLOSURES:
The information provided is intended to be educational in nature and is not intended to be a recommendation for any specific business or tax strategy, plan feature or other purposes. Accordingly, it should not be construed by any consumer and/or prospective client as solicitation of services.

Communications such as this are not impartial and are provided in connection with advertising and marketing. This material is not suggesting a specific course of action or any action at all. Prior to making any business or tax planning decisions, an individual should seek individualized advice from a personal financial, tax, legal, or business consultant professional that takes into account all of the particular facts and circumstances of an individual’s own situation. No person associated with Breakaway Financial Group LLC is a licensed attorney, and the information contained herein should not be considered legal advice.