Will We Get The Seasonal Year-End Rally This Year?
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The benchmark S&P 500 (SPX) finished Friday’s (Nov 5th) session at 4698, up 92 points or 2.0% for the week and up 941 points or 25.1% for the year. Even more amazing is that SPX is now up 115.3% from its March 2020 Covid low.
Table 1 below displays our Asbury 6 risk management model updated through Friday. It shows that all six constituent metrics are currently green, or bullish, The model itself turned back to a Positive, Risk On status on Oct 14th and the S&P 500 has risen by 6.3% since then.
Editor’s Note: The Asbury 6 is our own quantitative risk management tool which is updated daily in our Research Center. The “A6” is a combination of six diverse market metrics that we grouped together to look beyond the day-to-day, up-and-down noise of the stock market to determine its actual health — in much the same way that a doctor first checks the patient’s vital signs during an office visit. Four or more metrics in one direction, either Positive (green) or Negative (red), indicate a Tactical market bias. The dates in each cell indicate when each individual constituent of the A6 turned either positive (green) or negative (red). When all Asbury 6 are positive, market internals are the most conducive to adding risk to portfolios. Each negative reading adds an additional element of risk to participating in current or new investment ideas.
As Asbury Investment Management‘s Ken Tomko discussed in this week’s video update below, the magnitude and relentlessness of the market’s advance over the past 18 months is largely attributable to the enormous amount of monthly Federal Reserve stimulus that has been pumped into the economy since then. Even though that stimulus is now starting to get pared back, it is still enormous by historical standards.
More recently, though, and what we believe is almost as important, is that the US stock market is finally starting to see some leadership — i.e. relative outperformance, from the right places. One of these “right places” is small cap stocks.
Chart 1 below plots the iShares Russell 2000 ETF (IWM) daily since January in the upper panel with its coincident daily relative performance versus the SPDR S&P 500 ETF Trust (SPY) in the lower panel.
The green highlights at the right edge of the chart show that IWM finally rose above its February peak after numerous failed attempts to do so throughout the year, while also beginning a new trend of quarterly (63-days, our Strategic time period) relative outperformance versus SPY. This leadership has been missing for most of this year. As long as it continues, the market’s seasonal pattern of strength between now and January is likely to be fulfilled again this year.
Our latest video below shows how we have navigated these recent market conditions for client portfolios in real-time.
Asbury Investment Management (AIM): Our Latest Video
Asbury Research Ideas, Expertly Managed
Here is our November 5th Video Review, which explains how we have recently utilized Asbury Research’s market analysis and investment ideas to professionally manage client portfolios.
Bonus Video: AIM Explained
This new video talks about the typical client that Asbury Investment Management (AIM) works with, and specifically explains our process in managing these accounts.
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This communication is for informational purposes only. It is not intended as investment advice, or as an offer or solicitation for the purchase or sale of any financial asset. No inferences may be made and no guarantees of profitability are being stated by Asbury Research LLC. The risk of loss trading in financial assets can be substantial. Therefore, you should carefully consider whether such trading is suitable for you in light of your financial condition.