From the desk of Willie Delwiche.

Our dynamic portfolio update discusses some changes we've made to our holdings and takes a look at how the portfolios are faring in a period of heightened volatility for static 60/40 portfolios. We re-positioned our foreign equity exposure to move into areas of strength and adjusted our cash levels to stay in harmony with our risk indicators and the overall message from the weight of the evidence.

From the desk of Willie Delwiche.

From the desk of Willie Delwiche.

Key Takeaways:

• Stocks struggle when the Fed is aggressive
• Pace of tightening likely to be more than twice as fast as last cycle
• Bond yields at multi-year highs, rising at fast pace in a decade

After waiting and watching as inflation soared to its highest level in 40 years (and got there at the fastest pace in nearly three-quarters of a century), the Fed now finds itself behind the curve and needing to accelerate quickly. Post-mortems can be done later, and future historians can write papers about how the Fed was too focused on labor supply and supply chains and not focused enough on money supply as it delayed lift-off. Our focus is not on those “why’s” but on these “what’s”: what is the path for rates going forward and what is the impact of this for the stock and bond markets. 

From the desk of Steve Strazza @Sstrazza

Our Top 10 Charts Report was just published.

In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.

A Reversal In Risk

Not only are the most battered areas of the market digging in at logical levels of support and resolving higher, so is high-yield debt relative to Treasuries (HYG/IEI). This crucial ratio is an inverse illustration of credit spreads as we’re comparing the bond prices instead of the yields. HYG/IEI putting in a potential failed breakdown and resolving higher speaks to a reprieve in market stress and bodes well for risk assets. It’s no coincidence that we’re seeing similar action at the index level as the S&P 500 is back above its January lows. Bulls want to see this ratio catch higher in the coming weeks as this would support a tradable low and fresh rally for stocks as risk-seeking behavior re-enters the market. There is still some work to do, but we’re moving in the right direction.

From the desk of Steve Strazza @Sstrazza

Check out this week's Momentum Report, our weekly summation of all the major indexes at a Macro, International, Sector, and Industry Group level.

By analyzing the short-term data in these reports, we get a more tactical view of the current state of markets. This information then helps us put near-term developments into the big picture context and provides insights regarding the structural trends at play.

Let's jump right into it with some of the major takeaways from this week's report:

* ASC Plus Members can access the Momentum Report by clicking the link at the bottom of this post.

From the desk of Willie Delwiche.

This is the video recording of the March 17th Weekly Town Hall w/ Willie Delwiche

03/17/22 2:00 PM ET

From the desk of Willie Delwiche.

To the surprise of no one, the Federal Reserve voted to raise its target fed funds rate at yesterday’s FOMC meeting. The 25 basis-point rate hike was fully priced into the futures market. There was only one dissenting vote – St. Louis Fed President Jim Bullard expressed a preference for a 50 basis point hike at this meeting. 

I’ll admit I was surprised that neither Esther George (from the Kansas City Fed) or Loretta Mester (from the Cleveland Fed) joined Bullard in his dissent. At the end of the day, the Fed is now in tightening mode, and the pace of tightening is likely to pick up over the course of the year between the combined effects of interest rate hikes and balance sheet drawdowns.

I’m not going to parse the FOMC statement, dissect the dot plot, or break down the summary economic projections. Much of what needs to be said (and a lot of what didn’t need to be said) about the Fed’s decision has been offered in print, over the airwaves, and in our virtual communities.

From the desk of Willie Delwiche.

From the desk of Willie Delwiche.

Key Takeaways:

• Range-O-Meter points to Risk Off environment
• Risk On index remains stalled, Risk Off components gaining strength 
• Use breadth thrusts as guide that Risk On appetites have returned

The headlines remain noisy, but the message of the market is one of risk off leadership. Our Risk Off - Risk On Range-O-Meter shows the risk off component in most of these asset pairs gaining strength. Of the 20 pairs displayed here, only three (Value vs Growth, Aussie Dollar vs Yen, Lumber vs Gold) have the risk on component anywhere near new relative highs. In more than half the cases, the risk off component is within 10% of its highest level in the past year. This pair-wise intermarket view confirms the message from our Weight of the Evidence dashboard that argues for caution as conditions have deteriorated. The rest of this piece puts the current readings from this range-o-meter into some historical context and takes a closer look at our ASC+Plus Risk On & Risk Off Indexes.