June 22nd, 2020
Chadd Mason, CEO The Cabana Group
Covid-19 Cases Spike in the U.S. as Boeing Resumes 737 Max Test Flights
The S&P 500 closed on Friday just below its 200-day moving average. This was the culmination of a 5% drop for the week. The Dow and Nasdaq suffered an equally bad week. This is the second serious technical challenge that the S&P 500 has faced in the month of June. The selling was prompted by renewed fears of Covid-19 cases spiking throughout the country. We are now seeing more daily reported infections than at any other time during the pandemic. Texas, Florida and Arizona are all being hit especially hard. These states were among the first to relax restrictions and are now having to backtrack on fully opening their economies in the hopes of containing the spread. Each day it seems more and more obvious that this virus is going to be with us for the foreseeable future.
Given what we are facing medically and economically, I am frankly shocked that the markets have held up as well as they have. With that said, I never question the collective wisdom of markets themselves and continue to put my own opinions aside. I will offer a thought, which I touched on last week. When markets remain resilient in the face of bad news day after day, the risk to traders shorting the market is that eventually some good news pops up and prices surge to the upside. Right now, we are back at the low end of the trading range that has been in place for more than three weeks now, so it remains to be seen how this plays out.
This morning, Boeing announced its resumption of test flights for FAA certification of the 737 Max. This caused the stock to soar more than 10% and pulled the Dow up with it. The major indices are all up big for the day. This is allowing the S&P 500 to jump back above its 200-day moving average and keeps the rally that began on March 23 intact. This is an important response to the selling we saw last week. It is also worth noting that we are seeing leadership within sectors that have previously been laggards. Industrials, small caps, transportation and dividend payers had a strong day. This is a very good thing and is necessary for the broad indices to move higher.
At Cabana, we remain in our Moderately Bearish Scene and are prepared to add or reduce risk in response to evolving market conditions.
This material may contain ‘forward looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy. All investment strategies have the potential for profit or loss. All strategies have different degrees of risk. There is no guarantee that any specific investment or strategy will be suitable or profitable for a particular client. The information provided here is neither tax nor legal advice. Investors should speak to their tax professional for specific information regarding their tax situation. Investment involves risk including possible loss of principal.
Cabana LLC, dba Cabana Asset Management (“Cabana”), is an SEC registered investment adviser with offices in Fayetteville, AR and Plano, TX. The firm only transacts business in states where it is properly registered or is exempted from registration requirements. Registration as an investment adviser is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. Additional information regarding Cabana, including its fees, can be found in Cabana’s Form ADV, Part 2. A copy of which is available upon request or online at www.adviserinfo.sec.gov/.
The Financial Advisor Magazine 2018 Top 50 Fastest-Growing Firms ranking is not indicative of Cabana’s future performance and may not be representative of actual client experiences. Cabana did not pay a fee to participate in the ranking and survey and is not affiliated with Financial Advisor magazine. RIAs were ranked based on percentage growth in year-end 2017 AUM over year-end 2016 AUM with a minimum AUM of $250 million, assets per client, and growth in percentage assets per client. Visit www.fa-mag.com for more information regarding the ranking.
The Financial Advisor Magazine 2019 Top 50 Fastest-Growing Firms ranking is not indicative of Cabana’s future performance and may not be representative of actual client experiences. Cabana did not pay a fee to participate in the ranking and survey and is not affiliated with Financial Advisor Magazine. Working with a highly-rated advisor also does not ensure that a client or prospective client will experience a higher level of performance. These ratings should not be viewed as an endorsement of the advisor by any client and do not represent any specific client’s evaluation. RIAs were based on number of clients in 2018, percentage growth in total percentage assets under management from year end 2017 to 2018, and growth in percentage growth in assets per client during the same time period. Visit www.fa-mag.com for more information regarding the ranking.
No client should assume that the future performance of any specific investment or strategy will be profitable or equal to past performance. All investment strategies have the potential for profit or loss. All strategies have different degrees of risk. There is no guarantee that any specific investment or strategy will be suitable or profitable for any investor. Asset allocation and diversification will not necessarily improve an investor’s returns and cannot eliminate the risk of investment losses. While loss tolerance and targeted “drawdown” are identified on the front end for each portfolio, Cabana’s algorithm does not take any one client’s situation into account. It is the responsibility of the advisor to determine what is suitable for the client. An advisor should not simply rely on the name of any portfolio to determine what is suitable. Cabana manages assets on multiple custodial platforms. Performance results for specific investors may vary based upon differences in associated costs and asset availability.
Cabana claims compliance with the Global Investment Performance Standards (GIPS®). GIPS® is a trademark of the CFA Institute. The CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein. To receive a GIPS Report and/or a firm’s list of composite/pooled fund descriptions please email your request to info@thecabanagroup.com.