Setup for Portfolio Re-balance

On Friday I took advantage of the relief rally to sell base positions so that I can prepare to re-balance for what I believe will be an inevitable recovery. 

I sold and fully closed out of the following positions:

  • IXJ  Global Health Care ETF
  • NVO  Novo Nordisk
  • SCHB  US Broad Market ETF
  • SCHE  Emerging Market ETF
  • SCHF  International Equity ETF
  • SNY  Sanofi
  • SPY  S&P500 ETF
  • VEU  All World exUS ETF
  • VHT  Health Care Index
  • VWO  Emerging Market ETF

The rationale and strategy is fully explained in the most recent episode of the Wealthsteadig Podcast:


Stimulus Dead Cat Bounce?

The market has been bouncing on passage of the Emergency Stimulus.  Will it hold or is this simply a dead cat bounce?

My guess is that this counter trend rally won’t hold.  Next week as the USA death count rises, the market will likely crater again.  But it won’t lead to an economic collapse, the market will start forming a bottoming pattern which will eventually culminate in another Bull Market run.

In case you’ve missed it, here’s my recent commentary on:

PS- don’t bother sharing this “optimistic” message with Gloom & Doomers…some people enjoy being miserable.


Sky is falling along with OIL

Saudi Arabia kicked off an Oil price war in retaliation for Russia not supporting further production cuts.  Oil dropped to nearly $27/barrel before settling around $31.  This is the hardest drop in Oil since the commodity collapse of Feb 2016.  (see chart)

The S&P 500 broke below its 2 year moving average and so far is finding backing near 2018/19 support levels at ~2450.  This was also support during the May 2019 selloff caused by the initial Chinese Trade Deal Renege. 

The VIX has spiked to volatility levels not seen since Oct 2008.

I have no idea where the bottom will be.  The hysteria will likely get worse because the death toll hasn’t even reach 4,000 out of a global population of over 7 billion.  At the risk of being heartless, and stating the obvious, I won’t point out the long term positive economic benefits caused by a “thinning of the herd” tragedy.  If you’ve read beyond the headlines, cryptically hidden at the bottom of articles you might have seen a statement like this one referencing Italy’s COVID-19 death toll:

“National Health Institute chief Silvio Brusaferro said the average age of patients who have died was over 81. They were prevalently male and more than 80 per cent had more than two underlying health conditions.”

It would be crass to point out (so I won’t) that COVID-19 might actually pull Italy out of its demographic death spiral, preventing it from the otherwise inevitable pension/healthcare bankruptcy.  [This of course, is crazy talk.]

What I will point out, is that during the dark days of the 2016 Oil crash (and all the other crashes that preceded it)…the market not only recovered, but bounced back with a vengeance.


Virus or Politics?

The market has been EXTREMELY volatile, with 3% swings on a daily basis.

Today’s 4.22% rise in the S&P 500 has been attributed to the results of the Super Tuesday Democratic Primaries.  The market prefers Slow Joe over Socialist Sanders…no surprise.

But what about COVID-19 hysteria?  I’m sure that will be back tomorrow, which is why I’m just holding my positions and not trying to time the volatility.

Here’s what I told my clients today:

  • During the month of February, COVID-19 has wreaked havoc on the markets.  At one point the S&P 500 was down over 12%, when it bottomed on February 28. Since then volatility has been abnormally high but trending up.
  • I expect this volatility to continue until the virus goes from pandemic hysteria to endemic reality.
  • Unless future expectations change drastically, I intent to hold our positions through this rout.  This is a similar strategy that I used during the 2018 crash, when markets plunged nearly 20% and then quickly recovered.
  • I have no idea where the bottom will be, things could get a lot worse. However, LONG TERM, I see no lasting consequences to hinder consumption, therefore future corporate profits should remain strong.  At current levels, the S&P 500 is at a favorable historic valuation.
  • I think this is a good time to BUY, not sell.

As always, invest with CAUTION.

PS- more about politics in future articles, stay tuned.