From the desk of Willie Delwiche.

We sold commodities and bought bonds while tweaking where we get our equity exposure.

The Details: While none of the major asset classes are in up-trends, bonds now hold a relative advantage over stocks and commodities. We adjusted the exposure in the Strategic, Cyclical and Tactical portfolios to reflect these shifts and also to reflect leadership shifts we have seen within equities.

From the desk of Willie Delwiche.

Investor surveys indicate widespread pessimism but asset allocation data (and ETF flows) paint a different picture. 

The Numbers: September saw the 5th and 6th times in history that the AAII weekly sentiment survey showed bears above 60%. When bears have growled in the past, exposure to stocks was in the 40s and exposure to cash was only slightly lower. Now, equity exposure is still in the 60s (and above the long-term average) and cash exposure is in the 20s.

From the desk of Willie Delwiche.

The Scales are tipped toward risk and away from opportunity.

A challenging macro backdrop is weighing on the market and unsustained rally attempts have kept Breadth and Trends & Momentum from joining Sentiment as reasons to look for opportunity.

Our Weight of the Evidence Dashboard fills in the details and includes a few high-level charts that we are watching as we head into the 2022 homestretch.

You need to squint to see it, but the long-term trend in the CRB Commodity index fell last week for the first time since the end of 2020. 

The Details: This uptrend, the most persistent since 2002-2006, lasted 94 weeks. During that period, the CRB index was up nearly 70%. Over the past two decades, the CRB index has been trending higher 60% of the time and has risen at a  7.3% annual rate during those periods. It has fallen at 5.5% annual rate during the remaining 40% of the time (when the long-term trend has been falling).  

From the desk of Willie Delwiche.

Stocks & Bonds Make It Three In A Row

The Chart: 

In the past we've had bonds down for 3 consecutive quarters and we've had stocks down for 3 (or more) consecutive quarters. Since at least 1976, we have never before had stocks & bonds both down in 3 consecutive quarters.

Why It Matters: 

The lack of safe harbors in 2022 has taken a financial and emotional toll on investors. After the storm passes, some may want to re-evaluate their investment opportunity set and perceived risk tolerance.   

This is the video recording of the September 29th, 2022, Weekly Town Hall w/ Willie Delwiche.

09/29/22 2:00 PM ET

From the desk of Willie Delwiche.

The market is enduring a volatile week, finishing out a chaotic month in what has been an unprecedented year.

• Safe havens have offered no safety as cross-asset correlations have turned positive and balanced portfolios are enduring their worst year since the 1930’s.
• This week, underwater explosions have ruptured gas pipelines in the Baltic Sea, while a massive hurricane has crossed from the Gulf of Mexico to the Atlantic Ocean, leaving a trail of devastation in Cuba and Florida. 
• Stocks are now trading at their lowest level in two years and the British pound has sunk to its lowest level in two centuries.

Dismissing all of this as merely challenging seems trite. Acknowledging the difficulty of the environment helps chart a path for moving forward.

From the desk of Willie Delwiche.

The Fed unleashed a speculative bubble when it cut rates in the second half of 2019. Apple (AAPL), the largest company in the US, led the market higher during the boom and has been resilient as other areas have gone bust. 

The Numbers: Both AAPL and the equal-weight S&P 500 (RSP) are down 20% this year. But while RSP has pulled back to its lowest level since early 2021, Apple is still 14% above its June low. Longer-term, RSP is now only 20% above its mid-2019 level, while AAPL still has a 200% gain over the past 3+ years.  

From the desk of Willie Delwiche.

The earnings momentum trend rolled over last week. Our Macro Health Check now shows red lights (4) outnumbering green lights (2).

Why It Matters: The June stock market lows came with a macro backdrop that was challenging but stable. Stocks don’t move on good and bad, they react to better and worse. The macro environment is getting worse and holding support levels is more of a challenge. 

In taking a Deeper Look we will pull back the curtains on this checklist. We also look at how these latest developments are being reflected in investor risk appetite and where new risks might be developing.

The S&P 500 is testing its mid-June low as it remains in a persistent down-trend. Investors and traders can lean against specific support levels, but it is hard to have high levels of conviction when price and breadth trends continue to decline. 

The Details: At 24 weeks, the current down-trend has lasted longer than any since the Financial Crisis ended in 2009. Prior to the feast or famine years of the past quarter century, persistent downtrends were normal market behavior. 

From the desk of Willie Delwiche.

2022 Is Not 2008 - It Just Looks Like It

The Chart: 

In the past quarter century, only 2002 & 2008 have been more volatile than 2022. None have seen less strength beneath the surface than 2022. Other than this year, the only year to see more volatility than strength was 2008.

Why It Matters: 

Every year is its own experience, but we can see similarities in market environments over time. The current environment is consistent with past periods of persistent weakness.  

This is the video recording of the September 22nd, 2022, Weekly Town Hall w/ Willie Delwiche.

09/22/22 2:00 PM ET