Three Good Things Happened in the Market Last Week: Market Commentary from Cabana’s CEO – June 7, 2023

1 year ago

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Three good things happened last week. First, our government avoided a catastrophic debt default and passed a resolution to raise the debt ceiling. Second, we got a really solid jobs report. Hiring continued to grow unabated despite all types of threats to the economy and, importantly, wage growth slowed at the same time. This was viewed as a “goldilocks” report – not too hot and not too cold. The idea being that the economy can maybe avoid a recession and the Federal Reserve has something to hang its hat on in the form of slowing wage growth, which justifies pausing its rate hike campaign. Both of these events led to a big move up in the stock market on Friday and brings me to the third good thing. The “rest of the market” finally had as good or better of a day as the few mega cap technology stocks that have carried the stock indices since the beginning of the year. I have pointed out many times in recent weeks that most sectors of the stock market are flat or even negative for the year while the Nasdaq and S&P 500 were up 20% and 10% respectively. This discrepancy between a few gigantic stocks and everybody else is worrisome and is referred to as a lack of “market breadth”. For reference, you can see some of the visual examples we have provided in the last few weeks of commentaries (all can be found here). Compare that to what happened last week, which I am providing in a few visuals below. For the first time in a long time, we saw some positive “market breadth”. It is a good sign to me when the equal weight S&P 500 (RSP) is outperforming the market cap weighted version (SPY). 

One day does not make a trend, but this one day felt like something more than just coincidence. Let’s see if there will be some follow through this week of more of the same. That, in conjunction with a weekly close by the S&P 500 above 4200, would be evidence of this being more than another extended bear market rally. 

At Cabana, we remain allocated in our bearish positions but are preparing to add equity exposure upon CARA’s signal. 

The following from shows the equal weight S&P 500’s underperformance this year so far (prior to last week).  

The following from shows the equal weight S&P 500 outperforming beginning last week.

The following from shows the change in sector performance beginning last week.


January 17, 2024

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