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 CabanaThe 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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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