Natural Gas, Energy and Copper still have to show signs of life to fulfill their usual bullish winter runs. Meanwhile, Strong US equity markets have lead to excellent returns in the model portfolios that adhere to seasonal trade stratagies. Expect some modest seasonal weakness soon, though.
With the new year and new decade already here, the markets closed on one of the strongest years for the US equity market in the past decade. The S&P 500 (SPX) was up nearly 29% in 2019 – the second best year in the 2010s, only 2013’s return of just over 29% beat it. All broad sectors produce gains last year, with nine out of the 11 broad sector SPDR ETFs posting gains greater than 20%. The top three sectors, using SPDR ETFs as proxies, were technology (XLK), communication services (XLC, basically a technology ETF), and financials (XLF), returning 47.90%, 29.92%, and 29.22%, respectively. Energy (XLE), on the other hand, was the worst performing sector on the year with a return of just 4.69%. Energy has now been the worst performing sector in five out of the last six years.
As we have discussed previously, 2020 is likely to produce more gains! In fact, when the S&P 500 (SPX) had gains of 20% or more, which happened in 2003, 2009, and 2013 during the last two decades, the average return in the following years (2004, 2010, and 2014) was 11%.
As we move into 2020, we want to continue to overweight portfolios to favor the areas of leadership in the market highlighted above. With that said, the commodities market deserves attention in 2020. While crude oil has gained many investors’ attention recently, which is unsurprising given the activity in Iran, gold has been the more stable trend within the commodities/alternative space recently.
Novemeber is tracking the seasonal patterns very closely. We still expect a mild pullback early next week, but from then on we are likely to see post-Thanksgiving gains. Early December can be disappointing for bullish traders, but as Christmas approaches the bulls come back to the parade.
There are several market tendencies or historical biases that we highlight throughout the year. One historical tendency worth noting at this time of year is the “January Effect.” The “January Effect” refers to the tendency of small cap stocks (as a group) to outperform their large cap counterparts early in the calendar year.
Markets are up strongly since we turned bullish. We expect that momentum to continue after a mild pullback. Overbought signals are here.
Markets are up strongly since issuing the recent Buy Signal. The next two weeks often have retracements of monst of the gains in the first days of November. This mid-November weakness is a good time to add to positions.
We lay out the buy points and stop losses for the Tactical ETF Portfolios based on the the Seasonal Trade Strategy
With the US economic indicators faltering, everyone wants ideas on how to reduce their invetsment portfolio risk. Here are so ideas, and also a simple analysis of which US sectors are performing well.
There are 13 sector seasonalities that enter favorable periods in October. some last only a few months, others half the year. Entry levels and expected returns are exposed.
The Seasonal Buy Signal is on Hold. The bull market is still in waiting.