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This Week Marked the Suggested End of the Longest Continuous Bear Market Since 1948: Market Commentary from Cabana’s CEO – June 15, 2023  

11 months ago

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During the past week we have continued to see positive expansion in market breadth. More and more sectors are participating in the rally that began a month ago and has been supported almost exclusively by a few huge tech companies. In my view, this is a very positive development and strengthens my belief that this rally could be the beginning of a new bull market, rather than another in a series of very painful whipsaws. I would like to see the financial sector improve, but all in all, things look more solid.  

The market cap weighted indices, especially the Nasdaq, are technically overbought and more than due for a pullback or breather, so I think we should be prepared for some increase in volatility over the next few days or weeks. Markets don’t go straight up, and a pullback at the current levels won’t change my optimism. 

For those interested in the “technical” definitions, we exited the bear market this week after achieving a 20% gain from the October market lows. This marked the suggested end of the longest continuous bear market since 1948(Source: WSJ.com). 

Inflation continues to moderate, albeit slowly, and the Federal Reserve finally hit the pause button after 10 consecutive rate hikes (Source: CNN Business). This in and of itself is very good news for everyone, but especially for banks and the bond market, which has been obliterated over the past year. The yield curve remains severely inverted and that needs to change to take recession probabilities off the table. To me, the inverted yield curve is worrisome and a major risk factor going forward. For now, I will put that negative in my desk drawer and focus on the positives. 

At Cabana, we have reallocated all our portfolios in response to CARA’s signal this week and are now in our Transitional Bearish (improving) scene.  

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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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.  

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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