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Investing is Easy… Until It’s Not: Market Commentary from Cabana’s CEO – December 6, 2021

3 years ago

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The last week certainly falls into the not so easy category when it comes to investing. Equities of all types have sold off… hard. Small caps and technology have gotten the worst of it, but that is largely due to the blue chips and industrials underperformance over the past several weeks. All major indices have fallen from 5-10% in the rush to exit risk assets. The culprit is alleged to be a combination of the Covid-19 Omicron variant and the Federal Reserve’s position change on withdrawing some of its easy money policies to combat inflation. Well, I have been doing this for a long time and I can tell you that there will always be something that allegedly causes markets to go up or down. That is how humans are wired. We are programmed to need a defined reason for things. I believe the media knows this and takes full advantage of whatever seems to be the hot button item that is gathering the most attention. It is a vicious and painful cycle that investors (and all people with a smartphone) must live through. So with this reality in mind, I thought I would share my thoughts on the matter. First and foremost, I suggest that the vast majority of everything you hear is simply noise. Considered independently, every data point thrown at us is but a grain of sand on the beach… just a drop of water in the ocean. It is our belief that the sum is what matters, not the parts. Unfortunately, we are forced to constantly look at, hold and examine every part as if that part is itself the sum. 

From a technical standpoint, the Dow (DIA) has dropped all the way down to its 200-day moving average, where it held and bounced. As stated above, that index has been underperforming for a while. The S&P 500 (SPY) and Nasdaq (QQQ) have pulled back to their respective 50-day moving averages, where they have also found support for the time being. The 50-day and 200-day moving averages are closely watched by many institutional investors. Normal pullbacks are thought to hold within these levels. The 200-day moving average is considered especially important. A sustained break below that would signal a change in trend from bullish to bearish conditions. As such, these are worth paying attention to. Today, the bulls continue to hold the high ground from a purely technical point of view.  

An extended version of this commentary is available upon request to info@thecabanagroup.com.  

To receive the full commentary via email each week, visit our website and subscribe at thecabanagroup.com/weekly-market-commentary.  

NOTE: The following charts represent ETFs that track the above mentioned major market indices. 

The indices mentioned are unmanaged, may include the reinvestment of earnings and may not reflect transaction costs or management fees and other expenses. The index returns are calculated with dividends(net of estimated withholding taxes) reinvested. Unlike these indices, the strategy is actively managed and may include substantially fewer securities than the number of securities comprising the indices, and may have volatility, investment and other characteristics that differ from the strategy. Investments cannot be made directly into an index. 
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 Cabana. The 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.  

“CARA” is Cabana’s Cyclical Asset Reallocation Algorithm. Scenes assigned as per the judgment of The Cabana Group. Scene names and number of scenes have changed over time in an effort to obtain efficiencies and provide clarity of investment objective. 

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 2A or Form CRS. 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.

All recommendations made in the prior 12 months are available upon request. Cabana’s allocation history is available here. For additional information regarding our services, including performance disclosures and award methodology, please visit https://thecabanagroup.com/disclaimers/. 

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