CAMS Weekly View from the Corner – Week ending 3/27/2020
March 30, 2020
A characteristic we have seen this past week was not only that markets were up but equally important they continued to differentiate between certain sectors/sub industries and down to individual companies in terms of how they were treated by market participants.
Revisiting our previous Weekly View; when panic fear overtakes the market landscape, the first characteristic we look for is to see when collective participants are willing and able to begin to differentiate various investment areas and themes.
The overall point of this observation is for markets to bottom they first must reflect panic fear is subsiding.
Differentiating various assets by participants implies reasoning. Panic fear and reasoning reside on the opposite ends of the human experience – in particular when it comes to mass psychology among market participants.
Importantly, panic fear giving way to reasoning does not imply all is good again throughout markets and there will be nothing but straight lines upward in terms of trends. Rather, at this stage, our focus is to look for all clues that participants are working on putting a bottom in for the market.
Bottoms are just that – bottoms – meaning we do not go to a lower low. “Dow down another 1500 points today……..” type headline and bottoms do coincide in the sense that headline grabbing volatility continues in bottoms but when a deeper observation is made the observer realizes that said market has not gone lower for “x” amount of time now.
At this stage our focus is to stay deep in the details to ferret out any signs that characteristics may be surfacing that offer bottoming behaviors are being displayed. These are behaviors that have prevailed through a historical lens. This past week we continued to see follow-on signs. Can this last? We shall see via our detailed observations.
It’s Different This Time
When it comes to sharing the general above characteristics and our focus on first looking for bottoming behaviors a natural inclination is to think or respond with “it’s different this time.”
For my part, I offer it is always different “this time.”
What I mean is the underlying issue that has brought on tremendous downside asset pricing coupled with volatility is always different. Admittedly, sometimes the underlying cause rhymes with a previous experience but the minute details of the onset issue is always different.
What is more consistent though is the mass psychology played out via market participants across an array of investment landscapes.
Very simply, if the underlying issue is concerning enough panic fear ultimately sets in and price drops become cliff-dives. This process unfolds to a point and then we begin to see an ability of markets to stop making lower lows even while headline catching volatility continues.
The precedent of markets to halt putting in lower lows resides deep within market behaviors. That is, they display the aforementioned characteristic of differentiating various market areas as panic fear gives way to reasoning and with said reasoning begin to look down the road as to what will make sense in light of the general economic backdrop that will emerge.
This is how and why the strangest new leadership areas emerge from market carnage as the masses would never suspect “xyz” investment area to have launched into leadership within the investment performance comparisons months down the timeline.
Meanwhile, collective market participants looked at the landscape on a forward looking basis and ferreted out said new leadership was the areas that would be rewarded in the landscape that ultimately emerged – post crisis.
Important To Realize – A Personal Note
This Weekly View in conjunction with our previous edition has been focused on markets and the detailed observation of potentials that the stock market in particular has bottomed.
We have chosen to “stay in our lane” so-to-speak and continue to focus via writing specific to the market landscapes. Speaking of market bottoms and various characteristics as precedents to said bottoms can seem quite insignificant at historic times like these.
With the above, for my part, it was instilled in me from my mother numerous decades previous that in life we do not always have the luxury of tending to one issue no matter how pressing that issue may be. Rather, we must balance all of it in adult life.
As adults we all get that in spades.
With this, we will continue to share market focus with each passing week hoping that these Views, to whatever degree, may assist you in balancing your financial perspective as we all work through these trying times. Health before wealth is a long-standing mantra that I personally operate on, in terms of personal hierarchy, when in the deepest of pinches within myself, on balancing the scales in life.
Just like the precedents of market bottoms shared above, the precedents of health at this particular time in life is to care for yourself well and follow the distance guidelines. If, in so doing, others disagree with your vigilance, let them disagree but stay your course. Importantly, as you stay your course you will be caring for others health as well and that is noble.
God Bless the healthcare workers, first responders, food related workers, logistics personnel and other essential people who are literally placing their health at risk for our greater good. They are the heroes of this time!
I wish you well…
Director, Market Research & Portfolio Analysis
Portfolio Manager, CAMS Spectrum Portfolio
H&UP’s is a quick summation of a rating system for SPX9 (abbreviation encompassing 9 Sectors of the S&P 500 with 107 sub-groups within those 9 sectors) that quickly references the percentage that is deemed healthy and higher (H&UP). This comes from the proprietary “V-NN” ranking system that is composed of 4 ratings which are “V-H-N-or NN”. A “V” or an “H” is a positive or constructive rank for said sector or sub-group within the sectors.
This commentary is presented only to provide perspectives on investment strategies and opportunities. The material contains opinions of the author, which are subject to markets change without notice. Statements concerning financial market trends are based on current market conditions which fluctuate. References to specific securities and issuers are for descriptive purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. There is no guarantee that any investment strategy will work under all market conditions. Each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market. PERFORMANCE IS NOT GUARANTEED AND LOSSES CAN OCCUR WITH ANY INVESTMENT STRATEGY.