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The Stock Market Can Sometimes Feel Like a Casino: Market Commentary from Cabana’s CEO – August 16, 2024

2 months ago

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Well, just as quickly as the market collapsed two weeks ago, it has now rebounded to recover most of those losses. I have included charts of the Nasdaq 100 (QQQ) and the S&P 500 (SPY) for a visual of what I am talking about.  

QQQ as of August 16, 2024 via Stockcharts.com:

SPY as of August 16, 2024 via Stockcharts.com:

The Nasdaq dropped all the way to its 200-day moving average, where it held and immediately recovered and as of this writing has reclaimed its 50-day moving average. Amazing stuff indeed and further proof of the futility in trying to outsmart the stock market. Two short weeks ago the news was awash with discussions of market collapse, recession and “experts” proclaiming more selling to come as unemployment rises. Well, not so far. In fact, the exact opposite has occurred.  

Inflation has continued to fall, and the most recent jobless claims came in below forecast. Earnings have continued to hold up and buyers stepped in. If you had sold your Nasdaq positions when the sky fell you would have been down 15% from its July high and now have missed out on the 10% bounce. Simply said, I believe when it comes to investing, have a process and stick to it. The stock market is very much like a casino, and I want to stay out of the casino. Be an investor and that means you are in it for the LONG haul. The stock market provides access to your investments, but it is not the investment. 

Bond yields have moved down in the face of better inflation figures and the near certainty that the Fed will cut rates in September. This is all good news, and history suggests more upside for stocks over the next 12-18 months. Mortgage rates will drop, giving some much-needed relief to the real estate market and lending should likewise increase as the cost of capital decreases. This should help banks and related financial firms. The dollar should also weaken thus improving exports and the prospects of companies that have an international presence. I can go on and on, but you get the point. This is all good news and so long as unemployment remains stable, we have what I would call a “Goldilocks Scenario” – not too hot and not too cold. 

I will end by pointing out that we are still in a volatile environment and short-term swings like we just saw can and will happen. Throw in the political environment, our upcoming election and conflict in the Middle East and anything can happen overnight, but the fact remains that over the long-term investors in diversified assets should do well. Be one of those guys. 

At Cabana, we remain Bullish. 

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