Volatility will return

Today, I’d like to start off by directing you to a couple of video’s I recently posted covering some potential market movers & shakers.  These are: An outlook for Natural Gas, and a view on Chinese stocks.

Here is the link where you will find these recently recorded video’s. You may be interested in seeing the stark contrast in technical profiles between these two trades.

I’d also like to bring your attention to our “Ask us Anything” webinar that will be conducted on Friday September 10th. Live participants will be able to ask questions via the chat feature on Zoom, but even if you cant participate, the webinar will be recorded and available for viewing after the live date. As such, you can post questions now and still have them addressed for later viewing. You must go to this blog to post a question. Simply leave your question in the comments section.

Market volatility: coming to a theatre near you!

I expect to blog a bit more on this topic, but something that has been battering around in my brain of late has been the utter lack of volatility on the markets this year.  This lack of volatility looks to be a repeat of 2017 during the first year in Trump’s power. Markets seem to rise fast in first half of the year of 1st year presidencies (doesn’t matter who it is, or what they do). In Trumps first year, it just kept on going into the second half.  This chart below is a bit old, but the pattern did play out somewhat in 2017-2018 during Trump’s first two years. True to history, we often see volatility in the second half of the second year.

Below is a chart of 2017- 2018. Take a look at the volatility in the first quarter and in the final quarter of 2018 – these moves were necessary – they had to correct the excessive low-volatility  trend of 2017. History seems to be repeating itself. Like 2017, where the biggest correction during that entire year was something like 3% (!!!!!), this year we have only seen a couple of 3-4%-ers. I think we are in for a period of volatility in the coming months – please don’t ask me to pinpoint the start date. But its inevitable. Here’s the good news: Volatility provides those of us (with a trading discipline) a lovely trading environment – something like 2018 did. Its not so great for those without a trading strategy.

Ned Davis Research suggests September may bring that volatility

Despite the high likelihood of a change in market volatility soon – You have to take anyone’s precise market timing predictions with a grain of salt – which is why I won’t offer a “date” for that volatility to occur. But Ned Davis is a little smarter than most investors, so we can pay a little more attention to his insights. He’s been using a number of tools over the years to draw predictive projections for the S&P 500. Below is a chart of his 2021 projections driven by that model. So far, its been pretty accurate. September – according to his model – is the month to watch.

While I remain a trend guy first – I certainly respect models utilizing quantitative data. In fact, that’s what the Bear-o-meter is all about. I’ll be covering the Bear-o-mter reading in the next blog.

An offer for those who need help 

When the markets turn volatile and confusing, even the most patient investors may come to question the wisdom of the investment plan they’ve been following. Maybe, like a lot of people over the last few years, you have invested yourself, online. You didn’t feel you needed any professional advice…and so you didn’t pay for it. But, perhaps you are feeling that now is the time to consider letting an experienced Portfolio Manager manage your assets.

At ValueTrend, we’ve seen a lot of different markets come and go. And we certainly emphasize with people who worry about a changing investing climate as troublesome or disturbing. We’d like to help, if we can, and to that end, here’s what we offer:

 From 9:00 a.m. to noon EST every weekday morning, we offer a cup of coffee, and a second opinion. If the viability of your current investment strategy to prosper in a volatile market concerns you – come in and see us. Or,  if you are like many of our clients and not near our Ontario office, don’t worry! We are happy arrange a video or telephone conversation with you. The coffee will have to be virtual in that case! Contact us here.

 

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2 Comments

  • Hey Keith,
    In light of the expected volatility, I was wondering how much cash you are holding in your funds these days.

    Reply
    • Wendy–because we simply cannot argue with the trend, the only thing we can do is hold the traditional amount of cash that we usual do in the summer (10-15%). We are a bit above of that level right now at about 18% as we just sold a position out, but we won’t go any higher.

      Reply

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