Stableford Capital Insights

How are recent volatile activities – such as declines in the equity and fixed income markets, pandemics, civil unrest, politically polarized citizens, international discord – impacting market outlook? Stableford Capital’s leaders take the markets’ temperature and advise investors on what to look for, including how to find value investments. Learn more.

Why the big equity bounce that seemingly ignores bad news from trade wars, protests, and civil unrest in May 2020? We’ve seen the bottom in economic data, so the news is just getting better from an earnings perspective. Equities are forward-looking, pricing off future expected earnings.

After dropping 30% from the start of the year the low in March, the S&P 500 has rebounded 30% off the March 23 low, and nearly 13% in April to end down roughly 10% year-to-date. The 10 yr. US Treasury remained largely flat during April, closing the month with a yield of 0.64%.

We’re never happy with negative returns but we are happy when we are able to preserve your capital. On a relative basis, that is what we have done. The losses in our strategies are a fraction of the overall equities markets and a 60/40 mix of equities and fixed income. This is why we are proponents of the active approach to investing. It’s times like these when being prudent and risk-averse matters.

The S&P 500 declined 8.4% during February to close down 8% year-to-date and remains at similar levels through March 6. The US-Sino trade-détente and global-growth euphoria that began last September peaked during February and has been replaced with global contagion fears (double entendre).

The S&P 500 declined 1.9% during January, though it hit an all-time high on January 22 and has bounced to similar levels as of February 5. The run-up to all-time highs is largely explained by the Fed’s stealth Quantitative Easing (QE) program, as well as anticipation of better economic conditions following the détente in the US-Sino trade war.

The S&P 500 increased 6.4% during December, driven by the US – China preliminary trade deal and continued Fed stealth Quantitative Easing. While some of the details still need to be worked out with China, there seems to be a détente for now. This break allows markets to view the world order through rose colored glasses.

The S&P 500 increased 3.4% during November on the hope that a trade deal with China would be signed and belief that the economy had bottomed. Investors were getting nearly euphoric, and measures of value were beginning to look stretched (though a slight correction at the beginning of December rectified some of this).

The S&P 500 increased 2% during October as investors began to believe that the economy is beginning to re-accelerate. This move off the recent October lows was propelled by diminishing fears of recession and trade wars. Recent high frequency economic survey data has recently begun to turn upward, and the US – China trade war has moved toward (at least a temporary) détente.

After a volatile August, the S&P 500 increased 1.3% during September as fears of the global slowdown began to dissipate. The respite may be short lived however, as early October ISM surveys indicate a contraction in the manufacturing side of the economy. The key question from here is whether the contraction will spread from the relatively small manufacturing component (approximately 10%) to the much larger services side of the US economy.