Despite Strong Earnings, Equity Markets Continue to Struggle: Market Commentary from Cabana’s CEO – August 3, 2021

3 years ago

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Equity markets continue to struggle to reach higher ground despite strong earnings. Over the last several weeks we have discussed the relative weakness in many stocks, yet, impressively, stocks have not yet seen a sustained drop. Bond yields are signaling weakness going forward and a preference for safe yield over continued growth. I continue to believe we are in the early stages of a cyclical bull market that began last November, but the easy money has likely already been made. As such, an assimilation of the gains from the past nine months or more are in order. August is a suitable time for this as it is the weakest of all the months for stocks according to the Stock Trader’s Almanac. 

The COVID story is an undeniable wild card adding risk and increasing the likelihood of volatility moving forward. How much of the fallout from new infections is already priced in is subject to debate. It is impossible to know, but I am concerned. As investors, we need clarity yet that seems unlikely for a while. If blowout earnings do not move us higher, I am not sure any window dressing somewhere else will.  

Make no mistake, the longer major indices can tread water near all-time highs, the better off we are heading into the end of the year. As is often the case, the third quarter can define the year, which feels like a strong possibility right now. Let us all take some time to put things in perspective and express gratitude for our health and for the gains we have seen in our investments over the past year – all in the face of historic challenges.  

Disclaimers

January 17, 2024

This material is prepared by Cabana LLC, dba Cabana Asset Management and/or its affiliates (together “Cabana”) for informational purposes only and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. This material may only be distributed in its original format and may not be altered or reproduced without the prior written consent of CabanaThe opinions expressed reflect the judgement of the author, are as of the date of its publication and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by Cabana to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Cabana, its officers, employees or agents.  

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Commonly used index/benchmark definitions:  

All indices and categories are unmanaged and an individual cannot invest directly in an index or category. Index returns do not include fees or expenses. Benchmark indices will likely materially differ from Cabana’s portfolio strategies. Detailed information as to how the returns are calculated can be obtained online from the following link: https://thecabanagroup.com/disclaimers/performance-reporting-methodology/. 

Morningstar’s Moderate Target Risk index  follows a moderate equity risk preference and is based on well-established asset allocation methodology from Ibbotson Associates, a Morningstar company.  

Morningstar’s Tactical Allocation category includes portfolios that seek to provide capital appreciation and income by actively shifting allocations across investments. These portfolios have material shifts across equity regions, and bond sectors on a frequent basis. 

The S&P 500 Index is a market-capitalization weighted stock market index of 500 widely held large-cap stocks often used as a proxy for the U.S. stock market.  

The Russell 2000 and 3000 indices are market-capitalization weighted stock market indices that include, respectively, 2000 and 3000 of the most widely-held stocks and are often used as proxies for the U.S. stock market. 

The Nasdaq Composite Index is a market-weight capitalization index that covers more than 3,000 stocks listed on the Nasdaq Stock Market. What is the Nasdaq Composite, and What Companies are in It? | Nasdaq