Stocks are on the Move
What is it?
Stocks have been bouncing up and down within a downward trend that started around November 2021.
“One of the biggest lessons learned is that things do not happen in a straight line. These rallies are a defining feature of bear markets. Let’s look at the chart below outlining all the up and down moves of SPX during the past crashes.”*
Why does it matter?
This is not a market environment where you can just throw money on a trending stock and it continues to go up. As you can see above, to capitalize on the up and down movement of stocks we should not just buy and hold. That goes for stocks and securities that move opposite of stocks. Each up-and-down move is an opportunity. Using our tactical approach to investing we are actively making changes to the portfolios as conditions evolve.
Revenues Tend to Fall Ahead of Stocks
What is it?
Some investors believe the stock market is a forward-looking indicator. However, Hedgeye Risk Management presented us with some information that shows revenues may precede the stock performance.
“Let’s look at the chart of the day. The bottom of the S&P 500 didn’t come until about 1 year after trough revenue growth. If you do the same for 2008 using Financials companies, the bottom in the S&P 500 didn’t come until about 6 months after the bottom in revenue growth.”*
Why does it matter?
Companies have been reporting earnings lately. That data may be taken into consideration by the Fed as they look to combat inflation and restore price stability.
“Yes, it was Dec 14th that we last got to listen to Powell, but do you really think that someone who is openly saying that we need an extended period of a weaker consumer is going to stop raising interest rates on a positive GDP number? The Fed has told us over and over again what they are going to do, we just have to listen.”*
The Fed is meeting this week. Their decisions and comments will guide the investment implications of many investors as we navigate the months to come.
Other articles we found interesting this week:
The U.S. Is Sending Tanks to Ukraine. Here’s Who Makes Them.
What will the Fed and Jerome Powell do next week?
5 benefits of a Federal Reserve interest rate hike
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.
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Sources:
*Ryan Ricci. “Early Look”. 1/25/2023. Hedgeye Risk Management. https://app.hedgeye.com/insights
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