Survey says…

Today we’ll look at the results of my recent market survey. Then, we’ll pose another question.

To start, the survey was asking readers to take a stab at what they thought the most likely direction of the US market, illustrated by the DJIA, might take in the coming year(s). This blog highlighted a long termed trendline for that index- illustrating that the market was well ahead of that trendline. The question poised was, will the DJIA:

  1. Pull back to the trendline by a decline taking place over a few years
  2. Go sideways for a number of years until the market meets the trendline
  3. Keep moving up at the current angle, and not revisit that long termed trendline
  4. Experience a rapid decline/ market crash to meet the trendline
  5. “Other” scenario – readers noted a variety of possible outcomes that didn’t fit the above 4 choices

Drumroll, please. The results were as follows. 38 readers directly responded to the survey. Some other readers didn’t address the survey directly, so I couldn’t include their comments.

  • The overwhelming choice was #2 for a sideways market. 17/38 of respondents were in that camp.
  • The second most popular choice was #4 for a sharp decline/crash. 8/38 voted that way
  • In third place, choice number 5, which was actually not a choice – but a descriptive alternate scenario. This was a mixed bag, but typically a combination of two of the above choices. 7/38 voted for an alternate scenario.
  • Fourth place goes to choice #1, which is to experience a decline to the trendline over a few years, NOT a rapid crash-like decline described in choice 4. 4/38 voters went with this one.
  • Finally, choice #3 – a continuation of the recent trend with no return to that longer termed trendline. 2/37 voted this way.

Conclusion: If you are a contrarian, you’d have to say that choice 3 – which received the least number of votes- is the likely outcome. That could be the case.  If the majority expect a pullback or sideways period, the market could very move opposingly upwards. Having said that – readers of this blog are not “average” investors. The fact that you are studying how to trade systematically and less emotionally puts you in a very small minority.

So, perhaps the majority vote here is actually contrarian… Wrap that around your head for a moment…

I must confess that I am in camp #2 with the majority here. I cannot envision a market crash – despite my neartermed view of a pullback. I can envision lower returns on the markets for some time as new monetary loosening (Fed admits slow economy) begins later this year. That, and the fact that historically, markets do have sideways runs lasting many years. We may be approaching such a period soon. Please read my updated version of Sideways for more on that.

Either way, this exercise was for fun. The key point I try to emphasize in this blog, my books and the Online Trading Course is to NOT predict! Instead, we need a systematic approach to deal with ANY potential outcome. Many of you have taken my Online Trading Course. If you haven’t, I’d recommend you do so. The course outlines a plan to deal with any potential market outcome with capital preservation & profitability as top priorities. Click here to learn more about the course: ValueTrend Technical Analysis

April 16th budget

With Canada’s world productivity in dead last place – as discussed on my International ETF video, we are now facing a new Liberal budget announcement on April 16th. Quick question: who thinks that the upcoming budget will be filled with financially prudent decisions? Will there be policies to help raise Canada’s industrial productivity out of the dumpster? Or – will this be just another tax n’ spend budget adding to our already inflated debt? I’ll bet on door number 2, Monty. Post your guess below.

“I’m deeply worried about public policy in my country. Productivity is in a tailspin. A greater share of GDP is spent on here-today-gone-tomorrow current spending by governments and households than in decades. Tax policy is uncompetitive. Business bashing has become commonplace among people who’ve never spent two seconds working in private industry.” Derek Holt, VP & Head of Capital Markets, BNS

“Prime Minister Justin Trudeau’s failure, and it is his to bear, has been a failure to provide clear moral leadership. In doing so, he has created a vacuum…. In this case, it’s being filled by radical politics more akin to the Soviet Union’s foreign policy of the 1980s than our liberal democratic allies of today.” National Post

ValueTrend Portfolio Management

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5 Comments

  • Keith Question about discipline. We talk a lot about patience and waiting for confirmations of trend, about legging in and taking a loss when the trend breaks and moving on. We move out or should when targets are met.
    What about when your portfolio as a whole hits a target. Either the target gain for the year which I suspect some, if not many have arrived at for 2024 or a lifetime type target as in this is where I wanted to be to retire, buy that cottage etc.
    Is it a time to rebalance to a very low market exposure which would likely meet your needs into the foreseeable future , or would you suggest staying with the balance that meets your comfort level and maintaining market exposure and discipline. I ask this question as part of my prepare don’t predict homework.

    Reply
    • I love this question!
      Craig and I do this exercise regularly with clients. Case in point: one of our clients (young guy- family deals with us) got an inheritance. We divided it – as his goal was to buy a house – we put some cash in a HISA (high interest savings account) to cover the house. The other $ went to the equity platform.
      He now may need more than anticipated- the HISA isn’t going to cover his needs. So, with that in mind, we told him we should sell the portion of the equity he estimates he needs, as markets are high. But–we do MANAGE our equity platform (we ain’t no buy n’ hold zombies!)–so he can hold the remaining amount in the equity platform with the faith that we are prepared for whatever comes our way, and can limit our risk (hey–that sounds like a VT logo!)
      In other words, its all about goals. If you are going to invest for the next 10 years, you don’t cash out based on an opinion. You move according to a systematic approach. AKA–trends, sector rotations, —you increase/reduce cash, beta and hedging accordingly to the macro stuff (see my online course). But if you are going to the old folks home in 3 months, and will live off your portfolio and cant tolerate much fluctuation, its now time to cash out.
      Hope that helps

      Reply
  • That was great exercise! I think the conclusion is that most of us, readers, are biased by your blogs 😉 But you have a good track record so there is no shame about it. However it makes me realize that even in our small community of investors/traders, we may be followers and not challenging you enough… 🙂 It’s up to every single one of us to answer that question for ourselves…

    Hey, great work! Great teaching! Thanks.

    Reply

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