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Notable Strength in our Couch Indicator

CAMS Weekly View from the Corner – Week ending 11/8/2019

November 11, 2019

Collectively speaking, if we feel difficult economic times are directly ahead of us, if not having already arrived, is a couch purchase on the “get it done” list for us?

More directly, if you personally are feeling stress of your job being erased due to lack of demand of your company’s product/services are you pulling up the various new couch options for purchase?

The obvious answer for most is certainly no and through this, collectively, such discretionary purchases fall down the list of upcoming purchases when we feel our primary source of income may be imminently in harm’s way.

Enter our Couch Indicator and the notable strength it is putting on currently.

$DJUSFH - 11.11.19

Click For Larger View:   http://schrts.co/axiuibAD

The above is a one year view of the Furnishings Stock Index.  This falls under the much broader sector of Consumer Discretionary stock offerings.  This sub-industry and its larger sector are quite vulnerable to tremendous downside when the economy is heading toward or is in recession.

As an example, prior to the 2008/09 Great Recession, this Index began to turn lower after having been trendless.  The trend then turned into a downside swoon as the recession concerns became much clearer.

Once the recession signals were truly imminent and began in earnest this index had no problems putting on a strong trend – to the downside – to the tune of losing nearly 80% of its value.  That represented a true price destruction of this Consumer Discretionary Sub-Industry.

Post Great Recession this Index went on an upward tear nearly 8x its bottoming price level in 2009.  This peaked out in 2018 and has pulled back but here in 2019, as displayed, has been building strength and then went notably higher recently.

Currently, since mid-August, this index has gone up 35% while simultaneously there was a chorus of recession is imminent narratives.

This is yet another piece of information whereby collective market participants are not seeing recession – both currently or imminently in our near-future.

I wish you well…

Ken Reinhart

Director, Market Research & Portfolio Analysis

Portfolio Manager, CAMS Spectrum Portfolio

Footnote:

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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