Equity Markets Show Strength Ahead of Bank Earnings: Market Commentary from Cabana’s CEO – July 13, 2020

1 year ago

  • Share this:

Equity markets moved to the high end of their trading range over the past week. For those keeping track, the S&P 500 has been rangebound between 3000 and 3200 for the better part of two months. During this time, there were two occasions that sharp and rapid selling threatened to cause a break below 3000 and the all-important 200-day moving average. We held off both threats and bounced higher as buyers stepped in at that critical technical level. We have also seen two occasions where prices attempted to break above 3200 and, in doing so, turn positive for the year. The most recent of these attempts happened today. Each time the S&P 500 got its head above water, sellers stepped in and pulled prices back. The reversal today took place in the last hour of trading and it was steep and fast. This type of price action keeps the bearish case intact for the time being.

Second quarter earnings are going to kick off this week with major banks such as Goldman Sachs, Bank of America and Wells Fargo reporting. The earnings of these companies (along with many others) are predicted to be bad – historically bad… as in the worst year-over-year drop ever. It is quite possible that the market’s resilience is the result of whispers that earnings might not be as bad as analysts think. We are certainly due for some good news somewhere. Whether it is economic, medical, or even social, any good news could be a catalyst for another leg up. When and where such good news might come from is anybody’s guess.

The Federal Reserve is meeting later this month, as is the European Central Bank and the Bank of Japan. Congress here at home is said to be considering an additional relief package before its next recess. Maybe some good news will come from that. During the interim, we will monitor conditions and continue to follow our rules-based system. A part of that process is to never argue with the omnipotence of price. Price is the ultimate arbiter. Whether the strength in equity markets is deemed rational or not in the face of unprecedented economic problems matters not. It is what it is, and right now markets have shown remarkable strength.

A PDF of this week’s commentary is available at the following link:


February 23, 2021

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.  

This material may contain ‘forward looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy. All investment strategies have the potential for profit or loss. All strategies have different degrees of risk. There is no guarantee that any specific investment or strategy will be suitable or profitable for a particular client. The information provided here is neither tax nor legal advice. Investors should speak to their tax professional for specific information regarding their tax situation. Investment involves risk including possible loss of principal.  

Cabana LLC, dba Cabana Asset Management (“Cabana”), is an SEC registered investment adviser with offices in Fayetteville, AR and Plano, TX. The firm only transacts business in states where it is properly registered or is exempted from registration requirements. Registration as an investment adviser is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. Additional information regarding Cabana, including its fees, can be found in Cabana’s Form ADV, Part 2. A copy of which is available upon request or online at www.adviserinfo.sec.gov/. 

Past performance is no guarantee of future results. All investment strategies have different degrees of risk and the corresponding potential for profit or loss. Asset allocation and diversification will not necessarily improve returns and cannot eliminate the risk of investment losses. “Target Drawdown” is merely a descriptive term used to describe the general strategy and objective of the portfolio, it is not a guarantee, nor should it be construed to suggest safety or protection from loss. There is no guarantee that portfolio performance will remain consistent with the targeted drawdown parameter. While risk tolerance and targeted “drawdown” are identified on the front end for each portfolio, Cabana’s algorithm does not take any one client’s situation into account and there is no guarantee that Cabana’s strategies will be suitable for any investor. Investors and advisors should not simply rely on the name of any portfolio to determine what is suitable. It is the responsibility of investment advisors to determine what is suitable for their clients. Cabana manages assets on multiple custodial platforms. Performance results for specific investors will vary based upon differences in associated costs and asset availability.  

Cabana claims compliance with the Global Investment Performance Standards (GIPS®). GIPS® is a trademark of the CFA Institute. The CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein. To receive a GIPS Report and/or a firm’s list of composite/pooled fund descriptions please email your request to info@thecabanagroup.com.

The COVID-19 health epidemic has had substantial global economic impact on financial markets. As of March of 2020, restrictions to travel and business spanning the economy for activities not deemed essential have been imposed throughout the United States. These restrictions have caused unprecedented volatility and uncertainty in capital markets and have negatively impacted the economy. It is unknown how severe the impact to the economy and capital markets will be if the epidemic persists for an extended period of time. The epidemic may have a material adverse impact on Cabana’s investment advisory business including, but not limited to, the performance of our portfolio strategies.  

For additional information regarding our services, including performance disclosures and award methodology, please visit https://thecabanagroup.com/disclaimers/.