ETF Tracker StatSheet
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MARKETS HIT WALL OF WORRY, FED TALKS TOUGH, GOVERNMENT SHUTDOWN LOOMS
- Moving the markets
The markets tried to shake off their blues, but hit a wall of red. The indexes turned around and slid below unchanged lines. They couldn’t make a comeback and ended up with the fourth loss in a row.
This triggered our domestic “Sell” signal, as I warned you yesterday. You can find more details in section 3 below. The S&P 500 had a terrible week, losing about 3% and posting its worst performance since March. It was also the third week in the negative zone.
Even the most hated stocks couldn’t help the recovery. They suffered their second month of declines (and seventh week out of eight). This was the biggest weekly drop for the short basket since March.
Bond yields soared this week after the Fed hinted at one more rate hike for 2023. The 10-year Treasury yield jumped to 4.498%, the highest level since 2007. The 2-year rate reached 5.2%, the highest level since 2006.
Traders also worried about a possible government shutdown, which could hurt consumer confidence and slow down the economy. House Republicans decided to take a break on Thursday. Everyone knows that the government will shut down sooner or later, and the markets are just waiting for it to happen, and then guessing how long it will last.
Despite the Fed’s repeated messages that they want to keep rates “higher for longer” and that a ‘pause’ is not the start of a rate-cut cycle, the markets ignored them… until this week. As this chart from Google Trends shows, people are finally listening to the Fed.
ZeroHedge summed it up like this:
• *FED’S COLLINS: FURTHER FED HIKES ‘CERTAINLY NOT OFF THE TABLE’, EXPECT RATES MAY HAVE TO STAY HIGHER FOR LONGER
• *FED’s BOWMAN: MORE RATE HIKES LIKELY NEEDED TO GET INFLATION TO 2%, NEED TO REPEAT MONETARY POLICY ISN’T ON PRESET COURSE
• *FED’S DALY: I DON’T GET TO A POINT WHERE I’M READY TO DECLARE VICTORY, UNLIKELY INFLATION WILL REACH 2% GOAL IN 2024
So, no surprise that the market has changed its mind about the Fed’s rate path. The odds of a rate hike in 2023 are lower and the odds of a rate cut in 2024 are much lower.
The dollar had a strong week, rising for the eighth time in nine weeks. Crude oil had a lot of drama but ended flat. Gold was also unchanged.
Looking at the latest update comparing the AI Boom with Covid/Crypto bust, we can see that we are still on track.
Will history repeat itself?
2. “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.
3. Trend Tracking Indexes (TTIs)
The markets started off strong, but soon lost their drive. The indexes fluctuated throughout the session and ended lower for the fourth consecutive day.
Since there was no clear sign of recovery, I followed our domestic “Sell” signal and sold the relevant positions. This decision only applied to “broadly diversified domestic equity ETFs and mutual funds”.
Our TTIs dropped further, and we will wait for a trend line crossing to the upside before we invest again in domestic equity ETFs.
This is how we closed 09/22/2023:
Domestic TTI: -1.88% below its M/A (prior close -1.86%)—Sell signal effective 9/22/2023.
International TTI: +1.91% above its M/A (prior close +1.29%)—Buy signal effective 12/1/2022.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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