Stocks Have Started Falling on the Back of Wednesday’s Fed Statement: Market Commentary from Cabana’s CEO – September 22, 2023  

7 months ago

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Last week we talked about things being awfully quiet. Well, they aren’t now. Bond yields have exploded up through resistance at 4.3% on the all-important 10-Year Treasury bond. As of this writing midday Thursday, the yield is closing in on 4.5% and we are at levels not seen since 2007. Do you remember what happened then? The great recession followed in 2008 and 2009. I am not saying that is going to happen again, but consumers and businesses can only take so much pain. I am worried we are crossing that threshold. There is a ton of debt out there that is getting more and more expensive all the time. I’ve mentioned watching yields for the past few weeks and specifically looking for a break above that 4.3% level. We just got it on the back of the Federal Reserve’s statement Wednesday and stocks have started falling. The small cap index (IWM) and our benchmark equal weight S&P 500 (RSP) have now fallen below their 200-day moving averages. These are leading indicators in my view and portend a similar fate in the market cap weight tech index (QQQ) as well as the market cap weighted S&P 500 (SPY).  

The week isn’t over, and we could get a recovery quickly but as I see it a weekly close at these levels is cause for concern that lower prices in stocks and bonds are coming. The bond complex is now underwater for 2023 after sustaining losses in 2021 and losses (huge losses) in 2022. I read that this has never happened before in history. That is how unusual this economy and market are. Speaking of unusual, on Monday CARA (Cabana’s Cyclical Asset Reallocation Algorithm) completed a retracement from our Transitional Bullish Scene all the way back to Bearish in just over a month. The same thing happened in February and March. I said then that we had never seen that happen going back almost 20 years. It’s now happened twice back-to-back. That is how difficult this current situation is. 

We are in our Bearish Scene and invested entirely in short duration Treasuries across our Target Drawdown and Target Leading Sector models. Our new Target Beta models are also in our Bearish Scene and allocated consistent with their Target Beta optimization. 

We will continue to grind through and place a premium on preservation of capital. The good news is our Safety Valve positions are paying north of 5% (SEC yield) and should have very little exposure to this mess going on around us.  

RSP as of September 21, 2023 via

IWM as of September 21, 2023 via


January 17, 2024

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