June 10th, 2019
Below is a snapshot of last week’s market performance and what to watch in the weeks ahead from Chadd Mason, Cabana CEO and co-founder.
Last week’s commentary noted that the stock market was at a critical juncture. All relevant U.S. indexes had fallen below their respective 200-day moving average in the face of the escalating trade war with China, coupled with new threats of tariffs on all goods imported from Mexico. I pointed out that the equity markets’ ability to quickly recover was important. Stocks were hammered in May and as of last week were oversold and ripe for a bounce from a technical standpoint. If buyers didn’t step in quickly, we were in danger of significant further declines over the next few weeks.
Well… I do not claim to be psychic, but last Monday’s commentary was followed up by a four-day rally, which continues today. All major equity indexes ended last week above their 200-day price averages and are once again on solid ground. The small cap index is the only exception. I would also note that the transportation index is lagging. This makes sense given it is a direct reflection of goods being shipped worldwide. Transportation is ground zero of the trade war. We will watch to see if that sector of the economy gives us any hint on the future outcome of the tariff issues.
Interest rates got a corresponding bounce, which caused a pullback in bond prices. However, with interest rates near all-time lows, dividend paying stocks, bonds, REITs and bond substitutes (like utilities) remain very attractive. Federal Reserve Chairman Jerome Powell intimated on Wednesday that a rate cut may be forthcoming in order to deal with the headwinds caused by increased taxes on goods being imported/exported. We received a tame jobs report on Friday, which further supports a dovish Federal Reserve stance on interest rates. It looks like the Fed is once again signaling a backstop on falling stock prices. I won’t get into the ongoing debate over whether this type of monetary intervention is good for the long-term health of a capital economy, but it certainly emboldens investors to keep their money in stocks.
At Cabana, we avoid investing based upon predictions, as well as investing based on how things “should be”. We play the game as it is laid out in front of us. We remain moderately bullish.
This material is prepared by Cabana, LLC, dba Cabana Asset Management and/or its affiliates (together “Cabana”) for informational purposes only and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed reflect the judgement of the author, are as of the date of its publication and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by Cabana to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Cabana, its officers, employees or agents.
This material may contain ’forward looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy. All investment strategies have the potential for profit or loss. All strategies have different degrees of risk. There is no guarantee that any specific investment or strategy will be suitable or profitable for a particular client. The information provided here is neither tax nor legal advice. Investors should speak to their tax professional for specific information regarding their tax situation. Investment involves risk including possible loss of principal.
Cabana LLC, dba Cabana Asset Management (“Cabana”), is an SEC registered investment adviser with offices in Fayetteville, AR and Plano, TX The firm only transacts business in states where it is properly registered or is exempted from registration requirements. Registration as an investment adviser is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. Additional information regarding Cabana, including its fees, can be found in Cabana’s Form ADV, Part 2. A copy of which is available upon request or online at www.adviserinfo.sec.gov/.
The Financial Advisor Magazine 2018 Top 50 Fastest-Growing Firms ranking is not indicative of Cabana’s future performance and may not be representative of actual client experiences. Cabana did not pay a fee to participate in the ranking and survey and is not affiliated with Financial Advisor magazine. RIAs were ranked based on percentage growth in year-end 2017 AUM over year-end 2016 AUM with a minimum AUM of $250 million, assets per client, and growth in percentage assets per client. Visitwww.fa-mag.com for more information regarding the ranking.
Cabana claims compliance with the Global Investment Performance Standards (GIPS®). In addition to the firm’s third-party verification, six of Cabana’s core portfolios have been performance examined consistent with GIPS® standards. The Global Investment Performance Standards are a trademark of the CFA Institute. The CFA Institute has not been involved in the preparation or review of this report/advertisement. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS® standards. Verification does not ensure the accuracy of any specific composite presentation unless an independent performance examination has been conducted for a specific time period. Past performance is not indicative of future results. Due to various factors, including changing market conditions, the portfolios may no longer be reflective of current positions.
No client should assume that the future performance of any specific investment or strategy will be profitable or equal to past performance. All investment strategies have the potential for profit or loss. All strategies have different degrees of risk. There is no guarantee that any specific investment or strategy will be suitable or profitable for any investor. Asset allocation and diversification will not necessarily improve an investor’s returns and cannot eliminate the risk of investment losses. While loss tolerance and targeted “drawdown” are identified on the front end for each portfolio, Cabana’s algorithm does not take any one client’s situation into account. It is the responsibility of the advisor to determine what is suitable for the client. An advisor should not simply rely on the name of any portfolio to determine what is suitable. Cabana manages assets on multiple custodial platforms. Performance results for specific investors may vary based upon differences in associated costs and asset availability.