Greetings Everyone
As most know by now, trading on May 17 was pretty bloody, with the Dow Jones closing down 372 points. No sector or industry group was spared, and NASDAQ stocks, an index which contains almost all small-caps (think S-Fund), was hit badly. Allow me to share my views.
Bottom Line up Front, I remain 100% S-Fund but have been contemplating a move over to I-Fund and C-Fund. As crazy as the world geopolitical climate has been, it is hard to argue with cold hard cash, and that is what the I-Fund has produced all year. While some may believe that “it is too late to get in now”, in the investment world, when an index is doing very strongly, it behooves the investor to jump onto the train early, versus later. As we approach June, six months since Mr. Trump was sworn in, the international stocks have reacted very positively. There is no reason they cannot continue to do well.
Note that most sell-offs tend to be panic-driven, versus fact-driven, and as such, I avoid decision making with a lot of dust is in the air. It is hard to see, and hard to navigate. In aviation, it is taught that the first thing a Pilot should do after an engine failure or malfunction is “wind his watch.” In summary, the Pilot should take a deep breath, look away from the litany of illuminated warning lights, and for a brief moment, do another task.
It appears confidence is waning due to what is happening in the political arena. When in doubt, sell, and many on Wall Street appear to be doing just that. Lets take a look at some charts:
As can be seen from the charts, the May 17 volume on the SP 500 Index was very high, consistent with institutional investors selling positions.
As I stated before, the markets are no longer about interest rates, and instead are about policy, and policy’s close cousin, politics. Indeed, rate watchers have a date approaching, the FOMC Meeting on June 13-14 may shed some light on future rate hikes. However rate hikes are no longer the main attraction in the current show (circus?) right now.
Now for some positive energy: Dystopian views aside, the SP 500, while closing lower today on high volume, is still above a the lows of March and April. The new critical level to monitor is 2360.00, basically we need the index to quickly to back above that level, any contrary behavior gives cause for additional concern. While I continue to consider a move to I-Fund, this recent turn of events may change my approach, which may include my first safe-haven move to G-Fund in a long time.
Until then, lets monitor things. I remain 100% S-Fund and am contemplating an allocation change to include I-Fund and C-Fund in the near future. I may move to G-Fund if conditions worsen.
Thank you for reading and talk to you soon…
-Bill Pritchard
