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Leaderless Market?

CAMS Weekly Views from the Corner – Week Ending 8/11/2017

August 14, 2017

For all intents and purposes we are now in a leaderless market environment which is a concerning backdrop for the market overall.  When viewing well known market index leaders such as the Dow Jones Industrial Average (DJIA) any year-to-date downside performance has been marginal thus far in 2017.  The concern with a leaderless backdrop is it can turn the DJIA to the downside quicker than most expect.

We are not offering a view that the stock market is on crash alert.  Strangely, after the masses become accustomed to a market landscape that rarely incurs any downside adjustments merely suggesting a correction is plausible can have many inferring the suggestion is offering something far more ominous.

With geo-political issues surfacing more notably in recent days it has given most something specific to point to for market downside.  It is right here that we emphasize for the bulk of the summer the market has been hinting it wants to correct back as less and less leadership has shown itself.  That often is market-speak for downside adjustment is in the offing.

This is important because if said geo-political issues are resolved relatively quickly it may not mean an all clear signal would be given for the stock market being it has been deteriorating inside itself for some time.

The above chart encompasses performance returns thus far in 2017 for the Dow Jones Industrial Average (DJIA) depicted by the blue line and the S&P 600 Small Company index depicted by the black line.  What stands out with a casual glance of the chart is how much more volatile (think rollercoaster) the S&P 600 (black line) has been this year.

This is also representative of many areas in 2017 that have attempted leadership runs only to disappear and turn south just as they were beginning to trend.

The S&P 600 has been turned back hard nearly every time it had begun to show strength.  In addition, this small company index has reflected negative returns in 2017 for significant stretches of time.  Small size companies are more sensitive to economic concerns (real or imagined by the market) so their performance is important as a gauge of overall market health and vibrancy.

Realizing their performance rollercoaster has been experienced by other attempted leadership areas in 2017 speaks to a questionable, if not strange market backdrop and should be noted with or without front page geo-political issues.

I wish you well…

Ken Reinhart

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.

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