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[PLUS] Weekly Market Perspectives - Risk Off Environment Persists

May 17, 2022
JC Parets

From the desk of Willie Delwiche.

In last week's Perspectives piece, we opted not to wade into the discussion of capitulation and proactive efforts to call a bottom. The best evidence of a bottom is only available after the fact and by that point, the focus is already on whether the ingredients for a sustainable rally are present. 

Our checklist is designed to move the conversation along in a productive direction. We are looking for conviction that rally attempts either are or are not sustainable. Among the indicators we are paying attention to in this regard is our Risk On / Risk Off Indicator. Our focus this week is on this and other Risk On / Risk Off metrics. Our Risk On / Risk Off Indicator is not based on a specific market signal but is the accumulated message across several pairwise comparisons within and across asset classes. 

The message right now is clear: The Risk Off environment we have been in since earlier this year remains intact. 

Breadth Thrusts & Bread Crusts: Market Timing Is Hard

May 12, 2022
JC Parets

From the desk of Willie Delwiche.

Volatility is on the rise and some of the reactions we’re seeing are entirely predictable.

For instance, I’ve seen multiple versions of this chart shared in recent weeks:

It claims to show how hard it is to effectively time the market. Advisors and strategists use this to scare investors with a seemingly straightforward message: If you miss just a handful of the best days in the market, your returns will suffer.

[PLUS] Weekly Sentiment Report

May 11, 2022
JC Parets

From the desk of Willie Delwiche.

Key Takeaway: The unwinding of a liquidity-fueled speculative bubble is weighing on investor sentiment, pushing many indicators into areas that signal excessive pessimism. The challenge in the current environment is the disconnect between how investors say they are feeling and what (if anything) they are doing about it. Popular sentiment surveys are so widely watched that they seem to be producing more noise than signal. This makes less widely followed surveys (like those from Consensus and NAAIM) more useful. ETFs overall have begun to experience outflows, but there is still plenty of evidence that investors are looking for ways to increase equity exposure.

Sentiment Report Chart of the Week:  Buying Weakness Isn’t Evidence Of Fear

[PLUS] Dynamic Portfolio Management

May 10, 2022
JC Parets

From the desk of Willie Delwiche.

A risk off environment persists. Leadership areas are coming under pressure as market correlations rise (as they typically do in periods of stress). We are reducing our exposure and move to the sidelines to ride out this period of volatility.

[PLUS] Weekly Observations & One Chart for the Weekend

May 6, 2022
JC Parets

From the desk of Willie Delwiche.

Our weight of the evidence dashboard argues for caution, as risk outweighs opportunity. This is echoed by our Risk Off - Risk On indicators, which never showed a decisive move toward Risk On assets as stocks moved off their lows in March. Assessing the situation through the lens of various intra- and inter-market relationships, our range-o-meter shows a move toward Risk Off leadership over the past month. Risk Off assets are gaining strength, Risk On assets are stumbling. Where things go from here remains to be seen. None of us can predict the future. But we can identify whether we are in a higher risk or lower risk environment and adjust our portfolios accordingly. One of the best things I heard at last week’s CMT symposium came from Frank Teixeira: “The market gives you a lot of information if you are willing to listen for it.”        

Breadth Thrusts & Bread Crusts: What I Picked Up At The Symposium: Five Things I Want To Keep, One I Want To Drop

May 5, 2022
JC Parets

From the desk of Willie Delwiche.

I had a great time in DC last week, first for some dedicated time with the All Star Charts team that is normally dispersed all over the world, and later at the CMT Symposium itself. There was good food and drink and great conversations – in larger settings and small. 

As great as the presentations were overall, I often found myself chewing on asides and tidbits more than the large macro points. For me, the key insights were more about process and less about conclusions. Maybe that’s not surprising. Conclusions come and go based on market conditions. But process and approach should be consistent (though not immune from the refiner’s fire). I think Tyler Wood said it best last week, “We’re not predicting the future, just reacting responsibly.”

Things I picked up last week that I want to hold on to: