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US Equity Cycle Update

After a volatile 2018 I figured it was prudent to share my perspective on 2018 and looking forward to 2019. For existing clients, I thank you for entrusting me with your assets and for prospective clients, this write up provides a sneak peak of how I approach investing and I look forward to having you as a client.

All asset classes move in cycles. I look to identify the longer-term cycles and if the cycle is positive I want to be a buyer of that asset. In this example, I use the US stock market which I currently have in secular up cycle, so I am generally positive on US equities. At times, within that larger cycle, equities will have bear markets and corrections. This is what stocks experienced in late 2018 when the US equity markets suffered a 20% peak to trough decline in Q4. This was the largest decline since 2011.

Generally, corrections move in what resembles an ABC pattern of a varying degree (see chart). Currently there is a complete ABC corrective pattern of some degree at the December low in the SP 500 which I was buying expecting prices to recover (see chart notes).

There is a decent chance the current corrective cycle has completed and therefore I am generally positive going forward on US equity markets. But keep in mind there is always a chance the corrective pattern is not complete. It could become what I refer to as a larger and more complex corrective so I want to see a few more qualifying events before getting outright bullish again.

As a client you hire me not only to complete a financial plan. You hire me to identify and manage risk and to find opportunity. 2019 is off to strong start but I do expect volatility to remain elevated and I expect opportunity to lie ahead. If you have any questions or if you would like to learn more about my managed portfolios, please do not hesitate to call or email to schedule a consulatation.


Disclosure: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.


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