The local and international markets are moving faster than a stock car at the Indianapolis 500, and it looks like we are not making a pit stop any time soon!
Two articles caught my eye this week with some exciting insights on the S&P 500 by two very well-known and respected investment professionals.
The first article was by the very talented Anthea Gardner, founder of Cartesian Capital, titled "S.A. Budget takes a backseat, U.S. reporting season, and more” on the 2nd of March 2020.
Here are some of the excerpts from Anthea Gardner’s blog on EasyEquities which also includes a couple of local stocks:
“Stocks tumbled for a 7th consecutive day on Friday, with the S&P 500 index falling about 0.8%, bringing its loss for the week to about 11.5%, the worst weekly decline for stocks since the 2008 Global Financial Crisis (GFC).”
“The local market started the week with a 4.5% sell-off, something we haven’t seen since December 2008… All because of Coronavirus fears and news agencies now calling it a Pandemic (notice that the WHO, World Health Organization, are still not calling it a pandemic). It was. In early October that year, the S&P 500 fell about 18 percent.”
“It is estimated by S&P and Dow Jones that the market sell-off erased $6 trillion of market value, and the rush to safe haven assets saw Gold spiking and the 10-year U.S. Treasury yield reaching 1.35% after being at 1.8% a couple of weeks before."
The second was by a man who needs no introduction in the Technical Analysis space, Garth Mackenzie. This article from the latest FM Investors Monthly titled "TALKING TECHNICALS: The bull market remains alive and well but is very stretched” on the 27th of February 2020.
“The S&P 500 has been on a tear since October 2019. The world’s largest equity index has gained almost 20% in the four months since then.” And “Such an aggressive move higher has meant that the market has moved quite a long way above its mean.”
“For the past 10 years the S&P 500 has been in a powerful bull market and has spent most of its time above the 200-day moving average.”
“While this is a useful guide of the direction of the overall market, it is also worth noting that the market does tend to mean-revert towards the 200 day moving average at times. Corrections in a bull market are common and are usually deemed to be healthy as the market consolidates gains before establishing a sound base from which to launch the next upwards thrust.”
“From a seasonal perspective, the market is usually strongest between October and April. So as the final month of this time window draws to a close, it may be prudent to scale back risk exposure to the equity market to some extent.”
What does EasyResearch say
Markets do go through cycles, and we are indeed in a correction phase within the S&P 500 which has seen a spectacular down move recently. The “emergency” U.S. Federal Reserve interest rate cut might bring much-needed stimulus to the market, which will attract buyers.
However, the supply and demand chain disruptions have not filtered through in its entirety into the global economy, and the recent rally in the market might come to hold soon.
Clients have been slow to engage with the S&P 500 ETFs from the end of February to present, which shows investors are cautious and want certainty before making any investment decisions.
We are always encouraging investors in our research notes to take a step back and look at both the fundamental and technical picture before making an investment decision. Both Anthea and Garth are excellent examples of resources in both respected investment disciplines.
Source – EasyResearch, Anthea Gardner, Cartesian Capital, Financial Mail, Garth Mackenzie article, Business Live
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Barry is a market analyst with GT247, with a wealth of experience in the investment markets. Now in his tenth year in the markets, Barry "The Beef" Dumas brings a combination of technical analysis and fundamental insights to the table.