At the Quarter Pole
Posted on Sunday, May 5th, 2019
The most critical thing to control for successful investing is your emotions. We all have our own relationship to money and we react in our own unique way. In December we heard some groans from investors as they watched their returns slip away but we also heard from some who were cheering our purchases on with the joy of a bargain shopper at Christmas time. Fast forward to April – where we have spoken to several clients who are downright giddy with where we are so far in 2019. Being up 8-10% at the quarter pole of the race is exciting but there is still a lot of race to be run. At this point it is good for an emotional check. Are we upset we are missing out on upside? Perhaps we have been a bit too conservative and that is our nature. Are we giddy we have returned so much so quickly? Our ego can tell us when to cut bait and take down our risk. Being aware of our emotional response to money can guide us to what our next move should be.
The Fed has turned a bit more hawkish and markets hit a bump in the road. Markets have been expecting the Fed to cut rates and while Powell didn’t take that off of the table he certainly wasn’t promising one soon. The dip buyers were back and helped push markets back up but they did some damage to the charts. Traders are looking for a pullback of some sort and as we enter the weaker season for stocks and there are plenty of reasons why that might happen.
Economic number after number seems to be negative. Auto sales saw their biggest monthly drop since 2011 and the lowest sales since 2014. Global semiconductor sales, an indicator of economic health, fell 15% in Q1 and are down 25% from their peak in October yet the semiconductor index is up 36% year to date. Mortgage refi’s and applications are falling and that is with interest rates falling. We have seen the biggest monthly fall in refi’s since 2013. I could go on. Beyond Meat went public this week and rose 160% the first day. Softbank is talking about going public with an IPO of its $100 B Vision fund. When you feel like you are railing against the wind that is usually close to the top but momentum makes you look silly. Data is down and those in the know are selling. Makes you wonder.
2019 has been a spectacular year so far so we don’t expect investors to continue to press their bets. It might be better to let things play out on the economic and trade front while the market digests these big gains. We suspect that the market may sell on the news of a US – China trade deal. Markets that have bought on the rumor may then sell the news or markets may be disappointed by the trade deal outcome. Either way we suspect markets traders could say sold after an initial rally. The 200 DMA on the S&P 500 is at about 2774. That will be the first major line of support should stocks falter. There are lots of investors missing out on this rally so we expect any sell off to be met with buyers.
I think we aspire less to foresee the future and more to be a great contingency planner… you can respond very fast to what’s happening because you thought through all the possibilities, – Lloyd Blankfein
To learn more about us and Blackthorn Asset Management LLC visit our website at www.BlackthornAsset.com .
A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty. – Winston Churchill
Disclosure: This blog is informational and is not a recommendation to buy or sell anything. If you are thinking about investing consider the risk. Everyone’s financial situation is different. Consult your financial advisor.