Tech Stocks Lead Monday’s Market Rally: Market Commentary from Cabana’s CEO – October 12, 2020

2 weeks ago

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What a difference a week makes! We have been watching the broad equity market (S&P 500) battle to reclaim its 50-day moving average for the last three weeks. It has moved above and below that important technical level multiple times, with the most recent close above it being October 7. Since then, buyers stepped in with a vengeance and the S&P 500 is now up nearly 4% on the back of big tech. Apple was up more than 6% today. A test of the broad markets’ all-time high on September 2 seems imminent.

I noted last week that we were seeing some outperformance by small and mid-caps, and that is always a good sign as it indicates an increasing appetite for risk. Interest rates remain below resistance with the 10-year Treasury note at 77 basis points. Low interest rates, coupled with the expectation of improving earnings provides a “Goldilocks” scenario, whereby stocks can move higher. This could also (in part) be a result of some pricing in of a new stimulus package as President Trump tries to turn the tide in his re-election campaign. I said last week that the glass was at least half full. It is getting a lot fuller as we speak.

Key terms:

Basis points (BPS) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 1/100th of 1%, or 0.01% (Investopedia.com).

A Goldilocks economy is not too hot or too cold but just right—to steal a line from the popular children’s story Goldilocks and the Three Bears. The term describes an ideal state for an economic system (Investopedia.com).

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Disclaimers

This material is prepared by Cabana, LLC(d/b/a “Cabana Asset Management” & “Cabana Retirement Solutions”) 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. 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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