Third Quarter Blitz
What is it?
We introduced you to our Blitz Index on the April 18th Market Insight. The Blitz Index is based on Martin Zweig’s methodology to help gauge market bullishness. The calculation of the Index is done by taking into consideration recent changes on the Prime Rate, Federal Reserve decisions, level of Installment debt, and recent surge or capitulation of the stock market.
A score of 0 is very bearish while a score of 10 is very bullish. Over the last few weeks, the Index has hovered between a score of 2 and 4 depending on market volatility.
Why does it matter?
The Blitz Index is a tool we created to help us bolster our investment decision methodology. Our tactical approach considers macroeconomic data and analysis, provided by Hedgeye. It is supported by our analysis of market trends to help us identify strengthening or weakening securities. The Blitz is another tool to give us an edge based on how these items affected the markets in the past.
With such a low score, we continue to think that the markets may see further downside. While we have seen short-lived rallies in the U.S stock market recently, they have not been substantial enough to change its bearish momentum. We believe that this is further evidence that we need to continue to attempt protecting portfolios.
Cutting back is hard
What is it?
As the Fed tightens the monetary environment in the U.S., consumers are beginning to feel the heat and companies may be next. While consumers may have to curb their spending, companies may have to also adjust their plans.
“Weak inflation-adjusted consumer spending in the US only adds to these concerns and in turn, equities and rates lower are being pushed lower.”*
If broadbased spending significantly drops, there could be vast implications for the economy.
Why does it matter?
Our economy is highly dependent on the consumer and the companies that support our spending. When the consumer feels under pressure, he/she may reduce purchases which has a trickling effect in the economy.
We believe that we may start to see how the changes in consumer behavior may be affecting companies as they begin to report their Q2 earnings during the next few weeks.
Other articles we found interesting this week:
‘We are in a recession’: Long-time bull Cathie Wood warns
Bitcoin falls below $19,000, further shaking crypto markets
Priced-out homebuyers now face sky-high rents
Current 401(k) portfolio
Our last 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:
*Ross J Burland. “The US dollar stumbles despite a risk-off environment”. 6/30/2022. FXStreet. https://www.fxstreet.com/news/forex-today-the-us-dollar-stumbles-despite-a-risk-off-environment-202206302105
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