From the desk of Willie Delwiche.
Key Takeaways:
- Tactical model argues for caution heading into 2022
- Absence of a breadth thrust leaves market looking for energy elsewhere
- Liquidity indicator remains supportive but Macro Sentiment and Breadth point to rising risks
There was a story in the WSJ earlier this year about a fund manager who held 900 of his best ideas in his main mutual fund. I saw a model this summer that was made up of nearly 100 individual momentum indicators. Some will use a double-digit number of categories for gauging the market. One more holding, one more indicator, one more lever - it’s as easy as adding one more column in the spreadsheet. If more is better that is great, the question though is at what point is more just too much.
Information, even when useful, can easily pile up and become overwhelming. This adds to, rather than reduces noise. Distillation is an ongoing challenge in this age of distraction. There is a tension between focusing on as much as we need to, but as little as we have to. This can matter to investors facing the prospect of wading through 2022 outlook pieces filled with forecasts, expectations and a myriad of moving parts. I’d rather focus on just a few (less than a handful) of indicators for identifying risk and opportunity next year. I expect they will matter in 2022 because they have mattered most of the time in recent years.
