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Stock and Bond Markets Across the World are in a Heightened State of Volatility: Market Commentary from Cabana’s CEO – March 1, 2022

3 years ago

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I will start today’s commentary with a prayer for peace and an end to war. There are times when talking about the gyrations of the stock market seems trivial and almost impolite. Today is one of those times. As a husband, father, grandfather and citizen of this earth, I am afraid. I am afraid that we haven’t learned from the past. I am afraid that anger and impulse is more prevalent than reason and diplomacy. I am afraid that we are not leaving the world a better place than when we got here. I wonder what my granddaughter will see when she takes her turn at the wheel. Of course, my parents and their parents had the same fears and lived through worse. Maybe it is just an inevitable part of life. I wish it wasn’t. 

Stock and bond markets across the world are in a heightened state of volatility as developed nations (and by proxy their economies) grapple with the implications of a major war in Europe and the isolation of Russia. The fallout will undoubtedly impact the United States as well as Europe. First and foremost is the impact on energy prices and the positioning of the Federal Reserve in raising rates in response to inflation. The Fed’s job just got a lot harder. It now must balance the needs and potential response of our own economy with the rest of the world. For better or worse, the economic fabric of the United States, Europe, Russia, China and everyone else is very much integrated. A misstep in Fed policy can have ripple effects everywhere. With the uncertainty and the major equity indexes moving as much as 3% a day, there is little room for misstep. The S&P 500, Dow and Nasdaq all remain below their 200-day moving averages and have broken below their January lows. The 200-day moving average is an important technical line in the sand and evidences a correction at best, and the beginning of a bear market at worst.  

Looking under the hood at individual stocks, things look even more tenuous. Many of the stocks that make up those benchmarks are already in bear market conditions, having dropped more than 20% from recent highs. Treasuries and gold are outperforming other assets in a flight to safety by investors. We discussed the overall state of things last week and suggested it is a particularly good time to avoid guessing the next direction and just try to tread water and live to fight another day. If anything, the past week and the formal outbreak of war has driven that point home.  

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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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.  

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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