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Is the Recent Lack of Volatility Just the Calm Before the Storm? Or a New Healthy Normal?: Market Commentary from Cabana’s CEO – September 18, 2023

1 year ago

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As of Friday, major stock indices are churning right at their respective 50 day moving averages. This follows a plethora of economic reports last week. We got inflation data, unemployment and retail sales during the last three days of the week. All of it can be summed up as “in line” or slightly above expectations. The consensus is that the Federal Reserve will hold rates steady this week and keep the talk of another rate hike on the table for November. None of this seems to have moved the market in either direction.  

The past month has seen volatility dry up and the VIX (volatility index) fall to the lowest levels since the pandemic began in March 2020. With so much yet to be determined, I can’t decide if this is just the calm before the storm or perhaps a new and healthy normal. You can find plenty of “experts” who will tell you either, so I will let you decide for yourself.  

Interest rates continue to bang up against 4.3% for the 10-Year Treasury. That seems like an important inflection point to me. I expect stocks to suffer if we break above that. This is just another part of the market complex that seems to be in a holding pattern. What will happen to cause a break up or down in stocks and bonds is anybody’s guess, but it just feels awfully quiet right now.  

The equal weight S&P 500 (RSP) continues to underperform its market weight counterpart (SPY). That is a negative in my view. I have included a chart of both below. 

At Cabana, we remain in our Cautiously Bullish Scene with our Safety Valve engaged and allocated to short duration treasuries. 

SPY over the past six months (Stockcharts.com):

RSP over the past six months (Stockcharts.com):  

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.  

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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.  

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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