3/1/2019 Weekly Update: Looking Back at Our Year End Letter
by Zach Marsh on Mar 1, 2019
S&P 500 +0.4%
10 Year Treasury -0.98%
Weekly Update: Looking Back at Our End of Year Letter
Driving to work this morning I reflected back on the weekly letter I wrote on 12/28 of last year. As a reminder for those who are frequent readers of our Update Letters, in that letter I posited (somewhat pollyannaishly) that 2019 may be a good year for the stock market. I illustrated the long-term cyclical nature of bull markets and argued that most bull cycles last upwards of 15-18 years, with large pullbacks scattered in between. Here is the link for those interested in re-reading it .
Since the time of that writing the S&P 500 has rallied nearly 13%, with many skeptics, including myself, wondering how long this rally will last. Currently, the S&P 500 is sitting at 2804, a level that market substantial resistance back in October and early December. It was at this level on December 3, when the marked turned south and heading into a steep 16% decline. Now that we are back at this crucial level it seems appropriate that we re-address the prospect for a rosy 2019.
I’ve long maintained that a market bounce was never in question, but rather the sustainability and magnitude of the bounce was highly uncertain. The mark of whether this 2-month rally is the real deal, or just an extended bear market rally, will be determined by how it responds to the next downturn. Sustainable bull market trends are characterized by a succession of higher lows and higher highs. This current move has yet to exhibit a meaningful pullback which would define a higher low than the one made in December.
On the flip side, down trends are characterized by a succession of lower lows and lower highs. Even after this impressive rally, until we successfully take out the 2815-2800 level in the S&P 500, we will not make a higher high and will still be stuck in a mid-cycle downturn. Therefore, until we see additional confirmation from the market, the verdict is still out on the durability of this rally.
Judging the nature of bounce back rallies from market slides can be difficult. A 13% rally, after a scary Autumn, can make us want to throw open the cellar doors just because the wind died down, while meanwhile, the tornado may be still approaching.
Thanks for reading,
Zach and Dave
All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results. Tax laws are complex and subject to change. Calibrate Wealth LLC, does not provide tax or legal advice and are not “fiduciaries” (under ERISA, the Internal Revenue Code or otherwise) with respect to the services or activities described herein except as otherwise provided in writing by Calibrate Wealth. Individuals are encouraged to consult their tax and legal advisors (a) before establishing a retirement plan or account, and (b) regarding any potential tax, ERISA and related consequences of any investments made under such plan or account.
This material does not provide individually tailored investment advice. It has been prepared without
regard to the individual financial circumstances and objectives of persons who receive it. The strategies
and/or investments discussed in this material may not be suitable for all investors. Calibrate Wealth
recommends that investors independently evaluate particular investments and
strategies, and encourages investors to seek the advice of a Financial Advisor. The appropriateness of a
particular investment or strategy will depend on an investor’s individual circumstances and objectives.
Investing in commodities entails significant risks. Commodity prices may be affected by a variety of
factors at any time, including but not limited to, (i) changes in supply and demand relationships, (ii)
governmental programs and policies, (iii) national and international political and economic events, war
and terrorist events, (iv) changes in interest and exchange rates, (v) trading activities in commodities
and related contracts, (vi) pestilence, technological change and weather, and (vii) the price volatility of a commodity. In addition, the commodities markets are subject to temporary distortions or other
disruptions due to various factors, including lack of liquidity, participation of speculators and
Foreign currencies may have significant price movements, even within the same day, and any currency
held in an account may lose value against other currencies. Foreign currency exchanges depend on the
relative values of two different currencies and are therefore subject to the risk of fluctuations caused by
a variety of economic and political factors in each of the two relevant countries, as well as global
pressures. These risks include national debt levels, trade deficits and balance of payments, domestic and
foreign interest rates and inflation, global, regional or national political and economic events, monetary
policies of governments and possible government intervention in the currency markets, or other