- Moving the markets
Wall Street got a wake-up call on Tuesday night when Fitch, a ratings agency, downgraded the U.S. credit rating from AAA to AA+, citing the worsening fiscal outlook for the next three years. But the U.S. sovereign risk didn’t seem to care much, as this chart shows, unless you compare the different presidential terms.
This triggered a selloff in stocks on Wednesday, with the Nasdaq Composite plunging more than 2%, its worst day since February, as investors dumped risky assets and sought safer havens.
Some analysts tried to put a positive spin on the situation, saying things like “this is just a healthy correction after a strong rally, nothing to worry about” and “we still believe in the economy and the markets, despite this minor setback”.
But the earnings reports were mixed at best, and the manufacturing sector suffered another month of job losses, its fifth in a row. The ADP report showed that wages were growing slower, even though 324k jobs were added, beating expectations.
Bond yields soared, with the 10-year breaking above 4% for the first time since November. But they lost steam by the end of the day and closed lower.
The shorts finally had their day in the sun, as the stocks that they favored fell hard.
Banks and chipmakers were among the losers, with AMD taking a big hit. The dollar rose along with bond yields, but oil and gold went south.
So, is the Covid/Crypto boom back in sync with the AI boom? It sure looks like it.
- “Buy” Cycle Suggestions
The current Buy cycle began on 12/1/2022, and I gave you some ETF tips based on my StatSheet back then. But if you joined me later, you might want to check out the latest StatSheet, which I update and post every Thursday at 6:30 pm PST.
You should also think about how much risk you can handle when picking your ETFs. If you are more cautious, you might want to go for the ones in the middle of the M-Index rankings. And if you don’t want to go all in, you can start with a 33% exposure and see how it goes.
We are in a crazy time, with the economy going downhill and some earnings taking a hit. That will eventually drag down stock prices too. So, in my advisor’s practice, we are looking for some value, growth and dividend ETFs that can weather the storm. And of course, gold is always a good friend.
Whatever you invest in, don’t forget to use a trailing sell stop of 8-12% to protect yourself from big losses.
- Trend Tracking Indexes (TTIs)
The market suffered losses as bond yields rose sharply and a credit agency lowered its ratings for some companies. All sectors and indexes were affected by the sell-off.
Our trend tracking indicators (TTIs) dropped from their previous levels but still indicate a positive market outlook.
This is how we closed 08/02/2023:
Domestic TTI: +5.52% above its M/A (prior close +6.53%)—Buy signal effective 12/1/2022.
International TTI: +6.69% above its M/A (prior close +8.37%)—Buy signal effective 12/1/2022.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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