Tuesday, February 2, 2016

Oh February!

Let's start by looking at how we started 2016.
Source: CoreCapInvestments January 29, 2016 Update
ISM Trends
Source: Bespoke Investment Group
Note the year-over-year trend is negative for almost every factor in the ISM with some improvement or at least stabilization on a month-over-month basis. If you're bullish, unfortunately year-over-year data creates the trend.
Luckily January is over. Can we look to February for a boost? USA Today's Adam Shell reports:
February has a reputation for being a "flat" month for the 30 blue-chip stocks in the Dow, according to Bespoke Investment Group data. Over the past 100 years, the Dow has been up just 55% of the time in February, posting a puny gain of 0.1%, on average, which ranks No. 11 out of 12 months. The average gains over the past 50 and 20 years are muted, as well, with gains of roughly 0.25%.
Asset class returns so far in 2016 are showing investors are not moving money out of bonds into stocks, which may have been the Fed's hope. Instead the treasury market is telling us to exit stocks and buy treasuries. Economic data is rolling over on a year-over-year basis, and an earnings recession has begun. As the markets transition to pricing in the possibility an economic recession, February becomes the frontline for the bulls. The 10-Month and 12-Month simple moving averages have been whipsawed in the last six months. Based on monthly closes, 4 of the last 6 months these simple moving averages have indicated to investors to be in cash not stocks. The returns in January only made the case stronger for being out of the market. Chris Kimble shares this insight which sums up the feeling of many investors:
Please consult a qualified financial advisor before making any investment decisions. This blog is for educational purposes only and does NOT constitute individual investment advice.

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