Scott Sheppard
May 09, 2022
Tactical Growth Mandate - Weekly Briefing
So... the January to April period goes down in history as the worst start to a year on the S&P500 since 1939 - the year World War II began. Let’s hope we aren’t witnessing history repeating itself. This past week the stock markets continued their wild slide and there really hasn’t been anywhere to hide. Not only are growthy stocks and cryptos getting crushed, the defensive areas are getting creamed too. As the old saying goes “when the police raid the bar… even the piano player goes to jail”.
Seasonally, the stock market doesn’t tend to deliver good results from the May to October period. Another seasonal pattern to be aware of is the presidential cycle. Usually Q2 and Q3 of the second year of a President’s tenure is the weakest for the stock market as investors weigh mid-term elections. Toss in the Russian conflict, high inflation, Federal Reserve policy tightening, and extended valuations in the market and there are not many reasons to get excited and be aggressive in the coming months. Sitting mostly in cash and protecting capital to deploy later remains the core focus at this stage.
A market wizard, Mark Minervini, once compared buying stocks in the market decline stage as follows: “Think of it as running around trying to get roof jobs and installing roofs DURING a tornado. That would be ridiculous, right? Or, you could wait until the tornado passes, and then go pick up all those jobs from the damage it created and install the roofs on clear sunny days. A much easier and profitable path”.
Happy Mother’s Day to all the great moms out there – especially mine who might be my only actual reader. Thanks mom!