From the desk of Willie Delwiche.

It remains a risk off environment. With the indexes breaking down (S&P 500 at lowest level of the year and Value Line Geometric Index back to where it was in the Summer of 2017) and selling pressure intensifying, we are trimming our equity exposure. This helps increase our liquidity (which tends to be a scarce and valuable asset in periods of turmoil) and leaves us well positioned to lean into opportunity when our bull market re-birth checklist improves.

From the desk of Willie Delwiche.

Key Takeaway:

From the desk of Willie Delwiche.

The March 2021 CPI data (released in April of last year) showed the largest monthly increase in the prices in over a decade. The 2.7% yearly change in the CPI at that point was dismissed as being due to base effects written off as transitory. Some were even talking about how an uptick in inflation would be welcome. It has proven to be neither unduly influenced by base effects nor transitory. As inflation has continued to move higher and the Fed has belatedly attempted to bring it under control, neither stocks or bonds have responded favorably. The S&P 500 is down 3% since April 2021 and the aggregate bond index is down 8.5%. Commodities, however, have flourished, rising more than 77% in that time period. 

The details of today’s inflation report suggest price pressures remain prevalent. The Fed will likely have to intensify its inflation-fighting efforts. Whether from the Fed, the current Administration or the private sector, folks who were dismissive of inflation in Spring 2021 should have their current perspectives taken with a grain of salt. 

This is the video recording of the June 9th Weekly Town Hall w/ Willie Delwiche.

06/09/22 2:00 PM ET

From the desk of Willie Delwiche.

In Milwaukee, early June days when the temperature struggles to even get into the 60's happen almost every year. 

I've lived here long enough at this point (more than half my life) that it's not really a surprise anymore. For the first few years I lived here, I believed friends and family when they reassured me that it was "unseasonably cold." But I caught on soon enough.

In fact, it was 55 degrees and overcast here just yesterday. It had been raining off and on all day.  

I have no problem with any of those conditions – I’m not writing this note to complain about the weather. While I don’t think of it as Summer and it’s not what I was looking forward to, I can adjust. 

From the desk of Willie Delwiche.

From the desk of Willie Delwiche.

This All Star Charts +Plus Monthly Playbook breaks down the investment universe into a series of largely binary decisions and tactical calls. Paired with our Weight of the Evidence Dashboard and our Playbook Chartbook, this piece is designed to help active asset allocators follow trends, pursue opportunities, and manage risk.

In Focus for June: We are still waiting for the evidence that the bear market in equities has run its course and a new bull market is being reborn. While the short-term risk environment has improved slightly over the last week or so, the overall environment tilts more toward risk than opportunity and our longer-term risk indicator is still in risk off territory.

Enduring a downtrend is not a prerequisite for participating in the ensuing uptrend. We will practice patience in the batter’s box until the market delivers fatter pitches on a more consistent basis.

Key Takeaway:

From the desk of Willie Delwiche.

That this is an unfamiliar and uncomfortable environment for many investors goes without saying. It was unforeseen to the extent that it is at odds with recent experience. For passive investors, the past decade (even through COVID) was one of only mild (in terms of degree and duration) interruptions to the underlying upward trend in their portfolios. Through this period, some things that should not have been forgotten were lost. Among these were diversification principles across and within asset classes. Commodity exposure withered to nothing and US investors were rewarded for indulging their home country bias. With the trend in the 60/40 benchmark portfolio now in its most significant downturn since the financial crisis of 2008/09, investor nerves are frayed, the mood is sour and patience is being tested. Adding to this frustration may be the reality that if one was indeed paying attention to expiring breadth thrust regimes, collapsing new high lists and expanding new low lists, some of this year’s roller coaster ride could perhaps have been avoided. 

From the desk of Willie Delwiche.

Key Takeaway: Risks to the economy are rising, though a recession is not a foregone conclusion at this point. Barring a dramatic and unlikely abatement in inflation pressures, the path of least resistance for interest rates is higher than the market is accounting for at this point. Rally attempts have been volatile but, so far at least, short-lived and as longer-term trends turn lower, many investors are dealing with an unfamiliar (and uncomfortable) environment. While moods have soured, positions are little changed. Overall these are the conditions under which bear markets can die and bull markets be re-born. The evidence at this point does not suggest that turn is at hand.  

This is the video recording of the June 2nd Weekly Town Hall w/ Willie Delwiche.

06/02/22 2:00 PM ET