Week In Brief: Week of September 28

October 4, 2018

Mercifully, the stock market continues to ignore the Goat Rodeo transpiring in Washington D.C. A testament to the power of markets. And to the strength of the current fundamentals. Granting investors opportunity to focus on that which remains most important -- health, wealth, family and friends -- despite the fuliginous pettifoggery in which both sides of our political duopoly are engaged.
The S&P 500 lost -0.51 percent last week. While the DJIA dropped 1.07 percent. And small caps gave up -0.86 percent. Only the Nasdaq managed to move higher. Adding 0.76 percent to its impressive YTD tally.
The S&P 500 has risen 8.09 percent on the year. And with zero volatility of late. The index has posted 68 sessions without a one percent up or down move. One of its longest streaks in history. All the more notable as it's sitting at all-time highs. Which implies a compelling measure of calm.
When stocks have closed a quarter without any large daily moves for most of that period? It has typically preceded further gains ahead. This has happened 12 times since 1950. On average, the end of a calm quarter has led to a gain of 1.8 percent over the next two months. And +6.7 percent over the next six months. Only two small losses have occurred during that span.
Another recent achievement for the S&P 500? Its ability to register impressive Q3 gains. Which typically ranks as the weakest period of the year. When the "sell in May" phenomenon failed, the S&P 500 managed a gain of more than 7 percent in the quarter. Moreover, the benchmark index has clocked a perfect record of upside in the three months ahead. Portending more good things. With stocks averaging gains of 2.5 percent in Q4. And 11.5 percent in the next six months.
Not that we're admonishing investors to relax their risk management parameters. Just because you feel conditions are ripe to speed up into the curve doesn't mean you remove your seat belt. But, our outlook remains very constructive for the time being.
Fortunately, that's not the sentiment held by most investors.
Surveys of independent investor sentiment rose last week. Yet, sentiment remains depressed considering that markets sit just below record highs. The American Association of Individual Investors (AAII) reported bullish sentiment rose to 36.2 percent from 32.04 percent. But the average reading for the bull market is 36.7 percent. So, bearish sentiment barely budged. In fact, all the change came from neutral investors transitioning into the bullish column. The lack of fervent bullishness near all-time highs should be viewed as positive by contrarians like ourselves. So take heart!
Last week saw a slew of economic data released. With most of the big data sets underperforming estimates. These include the house price index and new home sales. The durable goods and jobless claims and University of Michigan consumer confidence. There was, however, strength in one of the most valuable reports: the leading indicators. Which shows no sign of a top in fundamentals. Net, net? Visibility remains solid moving forward.
U.S. equity markets have had every reason to decline this past month. But they have not. Now, Q3 earnings season sits dead ahead. And though it's tempting to be bearish about the potential for investors to discount peak earnings, cynical analysts have been singing that dreary tune throughout past few years. While market trajectories continue to extend upwards and right.
So long as credit markets allow companies to continue buying back stock, and supporting current prices, you have to remain bullish heading into Q4. And so, cautiously bullish we shall be. Eyes wide open. Accepting what the market will grant us. But hyper sensitive to any and all signs of pending danger... Such as the ever-worsening federal debt morass.
Finally, two scientists, an American and a Japanese, were awarded the Nobel prize in medicine for their revolutionary work in fighting cancer through immunotherapy treatments. Which represents, quite literally, the tip of the spear in biotechnology.
Cancer cells remains so deadly because, like the "cloaking device" employed by Star Trek's Klingon Warbirds, they can attack the body without detection from the immune system. Now, thanks to the work of these two pioneers, immunotherapy drugs are "lighting up" cancer cells. Enabling the immune system to detect and attack. All of which could, eventually, save the lives of hundreds of millions. Yeomen's work, gentlemen.
Upward and onward, friends.

Securities offered through Dempsey Lord Smith LLC – Dempsey Lord Smith LLC, Rome, GA Member FINRA / SIPC / MSRB.

Advisory Services offered through Dempsey Lord Smith, LLC, an SEC Registered Investment Advisor. Clearing through and accounts held at Charles Schwab & Co., Inc.

Dempsey Lord Smith, LLC nor Hyde Park Wealth Advisors LLC provides tax or legal advice and you should consult your accountant and/or attorney if considering an investment of this type. Hyde Park Wealth Advisors LLC is not controlled by or a subsidiary of Dempsey Lord Smith LLC. Investing in Alternative Investments come with a variety of risks that could result in a complete loss of principal investment.

Alternative Investments offered as private placement securities are offered only to qualified accredited investors via confidential private placement memorandum. Income and returns are not guaranteed and there are no assurances investments will meet their stated objectives.

© 2024 Hyde Park Wealth Advisors. All Rights Reserved