After a first quarter that registered the quickest bear market in history, down 20% in just 16 trading days, we then saw the strongest 3 day rally in 89 years. While there is a high likelihood that the stock market bottomed, volatility is likely to continue for the next month or two.
To help us navigate these choppy waters we rely on our Three Dials investment method to help us smooth out the waters during a choppy ride. Currently, the Three Dials are as follows:
Stocks look more attractive than bonds, but multiples are still above historical averages and so our valuation dial is negative at this time.
February's economic numbers (lagging indicators) released last week and were positive and thus leaves our Fundamentals Dial positive this month. Though we expect the news and numbers to be negative over the coming weeks and months due to COVID, growth should recover later this year and into next year.
Due to the sharp sell-off there has been technical damage done to the charts, leaving this dial negative.
A composite reading of the Three Dials puts us in somewhat of a defensive position for now. Once the data improves it will prompt us to take advantage of the situation and add risk.
The key to navigating these rough waters is to stay calm and to keep a steady hand on the rudder. We will get through this together. We look forward to celebrating in person once the all clear signs are here.