Market Update 9-20-2020

Video Transcript:

Good afternoon, everyone. I hope this finds you all doing well and staying healthy. It is Saturday afternoon. It is a beautiful Saturday afternoon the sun is shining. It is a bit chilly for my liking I kind of like it hot and humid. So I’m a little bit not liking this weather at all… but I hope you are doing well.

I want to update about what is going on, what we’re seeing in the markets. What am I thinking what am I looking at moving forward. I’m sure many of you have had some concerns over the last two weeks, because of the market action. We have seen the NASDAQ, as of close Friday, down over 10% from its all time high. We’ve seen the S&P 500 pull back over 7% from its all time high. And the Dow Jones pulling back over 5%. So there’s a lot of ruckus and noise as to why this pullback is happening.

As we look around at the charts we see that there’s a lot of strength, not just in the US, we’re seeing this strength globally. We’re seeing it more as a rotation out of tech and into things like materials. We’re seeing a rotation even into what has been a dog… the financials – a lot of money flowing towards that area in the last several weeks. And as we move forward, we think that you know that rotation may stick this time. In the past that rotation has been a head fake and everybody starts piling back into those tech names and driving them higher.

At this point, my feeling is that this may be a little bit stickier and we may get a continued rally in these areas that have greatly underperformed this bull run we’ve had since March lows. But again, all of this is actually healthy for the overall markets to continue higher. We have countries that are participating like Switzerland, Denmark, Sweden, Japan, Taiwan… all time highs. So we’re seeing a breadth expanding of what is happening in the markets.

So again, all healthy in pointing that the trend higher is still in place. In fact there’s some very well respected analysts that are saying markets may be shockingly higher by the end of the year. And whether it makes sense or not, we can’t worry about that. We just want to make sure we have you on the right side of whatever the market is going to be doing. And the last several weeks we’ve not been on the right side a little bit because markets have been quite tricky to say the least. We do have models that we have been using, liquidity models. Those models were pointing at the end of August to a pullback but it didn’t happen in the timing of the models. And again, models are just that… models. They forecast much like the weather forecast. And sometimes the weather forecast is wrong.

And so, again, when it comes to the models we’re looking at, a lot of that can be attributed to the fact that the Federal Reserve has just put so much liquidity into the system. The central banks around the globe have put trillions and trillions of dollars of liquidity into the economy. So, that has no doubt skewed what should be happening in the markets. But it is what it is. So again, we just want to make sure we’re on the right side of that.

And so the models delayed by about two weeks and that kind of threw us off from getting more defensive. We had been prepared at the end of August with a lot of cash but then the markets kept running so we went in on the long side pretty heavy. Then when we started to get a pullback in mid September I really wasn’t sure that it was a real deal that we’re going to see much of a pullback. And so we really didn’t want to get involved in chasing this down and trying to time the market in such a fashion that we could exacerbate any losses we had in the portfolio.

So, at this point, we are still looking at a much higher markets by the end of the year. Short term, the next two weeks from a seasonality standpoint, are very difficult historically speaking. But again, with the liquidity that’s been put into the system, we don’t know how much of that downside is continued. But we are prepared to protect to the downside if we see continuation of where these markets sit as a close of Friday. We may potentially add to the long side if we see the markets looking like they want to do a turnaround and start going back up.

Day-by-day, hour-by-hour sometimes we are exhausting ourselves with trying to look at charts and looking at models. Looking at the data that is coming in, for the most part, it’s been pretty positive…. beating projections on where we should be with what has happened with COVID. So again, all good signs. Hopefully it can continue.

But there’s still there’s so many unknowns out there as far as what’s going to happen. There are a lot of industries that are still a disaster… travel, airlines… to name a few. Probably if the government doesn’t come in and help the airlines again, some of them are going to disappear. Last week the airlines were asking for about $25 billion to continue to get them through this crisis and they said if they don’t, there will be massive layoffs. So again, there still are many problems we’re facing.

Could we have a second coming of COVID-19 that causes problems as far as overwhelming our medical facilities? We don’t know, we’ll see. Could there be a vaccine that hits soon? Probably not that soon… probably will have to get through this winter and stay the course of what all of us are trying to do to be safe, to try to distance ourselves. That’s going to affect some industries. If the government doesn’t step in and help them and provide more liquidity to them, probably some of them may may have to go bankrupt… but we’ll see. There may be you know that may be the next wave of problems… economies, bankruptcies to companies that have really suffered during COVID. But again, things that we have to wait and see at this point.

So, just wanted to give you an update because again I’m sure many of you are wondering what’s going on. But just to recap, we are looking to get defensive here in the next couple of weeks… if we have to, to put some hedging on. We’re prepared to add to our longs if things look like they’re clearing up. But again, day-by-day.

I’d like to thank all of you for being part of our family of AE and letting us take care of something that is so important to you, your financial future. We want to thank you for that. We take it very seriously, working very hard and we’ll continue to be diligent until we get through this crisis.

If you need anything, please feel free to reach out to me, give me a call. I will do anything I can to help you. Hope you have a wonderful weekend. Get outside. It’s beautiful. You may have to wear a jacket, maybe even a hat and some gloves, but get outside, get some fresh air in and enjoy the beauty around. Take care. We’ll talk to you all soon. Bye.