Commentary on Markets & 11.3.22 Trades
Since our last rebalance on August 4th the Equity ETF model has returned -4.56% v. the S&P 500 -9.96% v. the NASDAQ -18.70%. The primary drivers of this significant outperformance are as follows:
- Heightened Cash Position = markets rallied 13.71% from June 16th to August 16th before beginning another prolonged period of selling through mid-October. In early August we utilized the rally in the market to move 7.5% of your Equity position into cash. This has proven to be an extremely timely move as we retested the mid-June lows since that move.
- Natural Gas (FCG) = This position is +20.74% since it’s original purchase in August. Constrained Natural Gas supply in European markets due to machinations from Russia and other European governments has led to a spike in the Natural Gas sector. As we enter the winter months this trend is expected to have continued strength. Our technical measurements currently have Natural Gas (FCG) rated as the #1 investment sector in the market.
- Overweight to Value = The Equity ETF model was heavily invested in Value oriented stocks. So far in 2022 Value has outpaced Growth, this is largely due to high inflation and rising interest rates – both of which are negatives for Growth oriented companies.
As we move into the later months of 2022, we anticipate that there is more economic uncertainty ahead, with the potential for strong but short rallies in the market. It is key to remember that markets are a projection of how investors believe the economy and companies will perform in the next 3-12 months. With that in mind, markets are very clearly telling us that the economic future does not appear to be rosy. We are seeing that as major companies have begun to announce layoffs, Europe and Asian markets are seeing significant signals of extreme pain, and politicians are beginning to attempt to pressure the Federal Reserve to cease raising interest rates. With all of that in mind, there is a possibility that the Federal Reserve slows down their interest rate raises, which has the potential to cause a sharp bounce in equity prices.
