NAAIM Speaks is bi-monthly newsletter containing market insights and analysis from NAAIM member firms. “Speaks” is designed to provide a plethora of market analysis, indicators, some occasional humor, as well as a summary of NAAIM’s proprietary Dynamic Asset Allocation Model and Managers Exposure Index. The report is for informational uses only and is not to be construed as investment advice.

Things Can Change Quickly These Days

By: David Moenning, Heritage Capital Research

Published: 6.11.19

What a difference a week can make in this game, right? Last week at this time, the market was reacting in a rather hysterical fashion, of course, to news that the President was planning to use punitive tariffs in his quest to strike a deal on immigration with Mexico.

At the beginning of last week, traders were also fretting that the Fed would turn a blind eye to the mounting impact of tariffs and the now obvious economic slowdown happening around the globe. The fear was the Fed would wind up making a policy mistake, which could lead to a recession here at home.

And last week, stocks were breaking down below important support and the media’s favorite technical indicator – the 200-day moving average. The bearishly inclined opined that this was a harbinger of bad things to come and that a full-fledged retest of the December lows was on tap.

But a funny thing happened on the way to the debacle…

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Sell The Rally? Mexico, Mergers and Meat

By: Paul Schatz, Heritage Capital LLC

Published: 6.10.19

The markets start the new week with an absolute cornucopia of news. We have mega mergers, Mexico, meat and employment. Obviously, the most important news comes as no surprise to anyone; the deal with Mexico to avoid the first in a series of tariffs on Mexican goods in response to the border and immigration. Stocks rallied sharply last week with an expected deal with Mexico as a significant contributor. The weaker than expected employment report on Friday was greeted with cheers as the markets were now expecting the Fed to cut interest rates at least three times by the end of Q1 2020.

After the strong run last week and the big up opening expected today, the stock market certainly has the feel of an opportunity to sell the news for the very short-term, nimble trader…

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The Message From the NAAIM Indicator Wall: The Trend May Be Your Friend Again

By: National Association of Active Investment Managers

Updated: 6.5.19

The NAAIM Indicator Wall provides a weekly update to a robust array of stock market indicators. The “wall” includes readings and explanations of indicators and/or models in the areas of price/trend, momentum, key price levels, overbought/sold readings, sentiment, monetary, economic, inflation, and market cycles.

This week, we’re featuring the Price Trend Indicators Board, which is designed to give us a feel for the “state” of the current trend.

Our take is that while the board is not in a “table pounding” state, the trend may be a stock market investor’s friend again soon…

Note: The Indicator Wall is a benefit provided to NAAIM Members and is password protected. To obtain a temporary password, contact NAAIM at 888-261-0787.

Link to NAAIM Indicator Wall

Should Investors Bank on the Fed?

By: Jeffrey Miller Dash of Insight

Published: 6.8.19

Did last week’s trading clarify the chaos I discussed last week? Not really. The market rallied strongly, but the explanations are mixed and so is the prognosis. The main question seems to be: Should investors rely upon the Fed to support stocks?

What you see depends upon where you sit.

  • If you believe that the market leads the Fed, you have one viewpoint. If not, you may be more skeptical about depending on Fed action.
  • If you think the economy is very weak, you are easily convinced by one set of arguments. If you see the decline as a normal reversion to economic trends, you are not so worried.
  • If you think the trade issues will soon be resolved, you are confident. If not, the question is how much to worry.
    Viewpoints

Next, let’s review some important viewpoints…

 

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The Tweets Continue

By: Ryan Redfern, Shadowridge Asset Management

Published: 5.31.19

Just when everything is looking good in the markets and the economy, something has to show up and throw a wrench in the works. When the S&P 500 hit an all-time high on May 1st, the tweeting began. And just like that, the US is flirting with a trade war with China. Since the first of May, the market has been reacting (and often over-reacting) with each tweet, both positive and negative.

Last month we suggested it “odd” that Utilities (often thought of as a “defensive” sector to own when the market isn’t doing so well) were a pocket of strength in this market. And since then, that sector is actually up for the month (Source: FastTrack Data). Over the past couple of weeks, we’ve been slowly selling out of the stock market to reduce exposure. We believe our investment models are now positioned to be resilient if the market continues down a negative path…

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Update: The NAAIM Dynamic Allocation Model

Designed to be a value-add benefit to membership, NAAIM offers a Dynamic Asset Allocation Model based on the NAAIM Indicator Wall of indicators and models. The overall objective of the model portfolio is to dynamically adapt to changing market environments and to keep equity exposure in line with current conditions. The model targets a normalized allocation of 60% stocks and 40% Bonds.

Here is this week’s model allocation:

The model has been run live on the NAAIM website for several years and has demonstrated the ability to reduce exposure to market risk during negative environments such as those seen in 2015-16 and 2018.

More on the Dynamic Allocation Model and Historical Readings

The NAAIM Dynamic Allocation Model is for illustrative and informational purposes only, and does not in any way represent an endorsement by NAAIM or an investment recommendation.

Is “V” for Victory Again?

By: Rob Bernstein, RGB Capital Group

Published: 6.11.19

It appears that another V-shaped recovery is unfolding as some of the headline risks (trade wars with China, potential tariffs on Mexican imports and fear of how the Federal Reserve would manage this environment) have subsided. In turn, stocks have once again reversed in fast fashion…

However, that changed on Monday…

Link to the Full Article

Big Swings – Not Much New

By: Sam and Bo Bills Bills Asset Management

Published: 6.7.19

This continues to be a news driven market which can lead to big swings in either direction. Despite the rally this week, it would only take an errant tweet over the weekend to send investors back into a selling mood. In the intermediate term, nothing much has changed. The S&P tested support and is now back in the trading range that has defined this market over the last few months. Large cap indices are all back in that trading range while small and mid caps continue to exhibit relative weakness. The weakness remains a thorn in the side of the bulls…

Link to the Full Article

Deals and Algos

By: Dexter P. Lyons Issachar Fund

Published: 6.11.19

Trump cuts a deal with Mexico and the market rallies. Mexico agreed to stem the tide of immigrants crossing our southern border and President Trump agreed to not impose 5% tariffs. The uncertainty of Mexican tariffs had the market worried about the potential negative impact on corporate earnings, but that concern appears to have been lifted and the market is greeting the news with a warm welcome.

This has been a news driven market and when the news is perceived as “good”, the algorithmic trading programs (algos) kick in “high gear” and drive prices higher and visa versa when the news is perceived as “bad”. Yes, there is a lot of emotional (fear & greed) “human” trading in the market but I believe that computers dominate most of our trading today.

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The NAAIM Member Exposure Index: Staying In Tune With Environment

The NAAIM Exposure Index represents the average exposure to US Equity markets as reported by our members in the organization’s weekly survey. Note that many NAAIM members are risk managers and tend to reduce exposure to the markets during high risk environments.

Below is last week’s exposure reading. We note that managers have been quick to reduce exposure recently…

More on the NAAIM Exposure Index

NOT INVESTMENT ADVICE. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Investors should always consult an investment professional before making any investment.

Tags: NAAIM, NAAIM Speaks, Stocks market analysis, Stock Market Analysis, Stock market, stock market indicators, David Moenning, Paul Schatz, Jeffrey Miller, Rob Bernstein, Sam Bills, Bo Bills, Dexter Lyons, Ron Rough, Teri Spath