One month of selling in equities is not enough to dampen what has been a strong year across size and geography. All major indexes exhibit favorable technical setups, holding positive upward trends with plenty of room to run before recovering all-time highs.
This small pullback may be a result of overexuberance, but investor sentiment surveys show that bullish attitudes have returned to a healthy level, which leaves our Momentum Dial in a Positive position.
Economic data continues to be a mixed bag, reflecting the uncertainty over the direction of the economy. On the one hand, manufacturers worldwide are cutting orders in anticipation of a potential slowdown, and consumer survey data paints a pessimistic view of future activity.
That said, hiring continues to grow across most sectors of the economy, with workers pouring back into the job market looking to fill the 8.8 million open jobs in the US. On balance, our Fundamental Dial retains its Negative reading.
Investing is more than just a comparison of stocks versus bonds. But, with stocks in the midst of a double-digit earnings decline while bonds are paying yields at multi-decade highs, the cost of owning equities now seems high.
According to Bespoke Investment Group, the post-COVID performance gap between stocks (+80%) and bonds (-11%) is the widest since March 2000. Stocks are once again “expensive” by our metrics, so our Valuation Dial reverts to Negative.
The shift in our Valuation Dial pulls our composite Three Dials reading back into a Moderately Defensive position, with two dials Negative and one dial Positive
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The markets can be difficult to navigate and can be bumpy along the way. Through our collective 75+ years of experience, we’ve learned to keep it simple.
Our investment advice is based on a principled, evidence-based strategy that guides our decisions. We work to mitigate downside exposure while producing competitive returns over the long-term.
Our investment philosophy, known as the “Three Dials”, factors in three primary indicators: Momentum, Economic Fundamentals and Valuation.
The Three Dials provide a cohesive reading on the health, or “pulse” of the markets. The Dials provide a passive investment approach, with an active overlay. Each dial adjusts to data-driven indicators for maximized risk efficiency and an optimal allocation of diversified assets within your portfolio.
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