A Black Swan Event, Almost…

In last month’s blog, I spoke about a “black swan type of event” and how these types of events could create market disruptions. Well low and behold, last month our country almost had a black swan event in Pennsylvania involving the former President. Thank goodness that was not the case.

So as much as the markets seemingly chug along during the year with its normal ebbs and flows, investors must consider anomalies that can occur to disrupt the stock market. Whether it is a terrorist attack (domestic or foreign), a middle east crisis that could disrupt the oil markets or a housing market crash as we witnessed in 2008, all these events could be considered as a “black swan event”. Now there are ways to protect your portfolio in case of such an event and I would recommend speaking to your professional portfolio manager/financial advisor to cover this topic.

Now to the markets, the major averages in July did experience a spike in volatility, $VIX (see chart here). This is no surprise to me especially as 2Q earnings reporting season got into full gear and of course the political events that occurred last month including President Biden dropping out of the race. Q2’s corporate earnings have been a mixed bag especially in the tech sector where many tech companies reported their earnings that disappointed investors. Let’s not forget stocks have been trading at all-time highs and if you miss the mark in your earnings report, those all-time highs will adjust accordingly. Let’s not forget it is also unreasonable to expect that record highs will continue if companies don’t perform to the expectations that drove stocks to all-time highs.

As I look at the technical shape of the markets, the Dow Jones Industrial Average (see chart here) and the small-cap Russell 2000 (see chart here) are currently being supported by their 20-day moving averages. However both the Nasdaq Composite (see chart here) and the S&P 500 (see chart here) have both been under selling pressure and have currently slipped below their respective 20-day M/A. I am not overly concerned about this break below; we would have to see more selling pressure in order to see if this is a new trend or a temporary situation.

Good luck to all 🙂

~George

Earnings And The Election…

Now that the first half of the year is in the books in which we witnessed the markets hitting all-time highs, investor focus should shift to Q2 earnings reporting season and the upcoming election.  Once again the S&P 500 (see chart here) and the Nasdaq Composite (see chart here) hit record highs on Friday to close out the month of June. The Dow Jones Industrial Average (see chart here) is hovering around the 39000 zone, while the small-cap Russell 2000 (see chart here) continues to bounce around the 2000 level.

After the much-anticipated Presidential debate which is the first one in this election year, stocks reacted in a volatile manner on Friday. As mentioned above the S&P 500 (see chart here) and the Nasdaq Composite (see chart here) both set all-time highs on Friday before reversing and closing lower on the day. I am not sure why stocks took off at the open on Friday and set all-time highs especially with how the debate went on Thursday night. I refused to watch the debate for a variety of reasons and from what I am hearing and reading, I am glad I did not watch it. There are no words for what is going on here in our country and I will leave it at that. I’d rather focus on the positive which are the markets and how incredibly resilient they are.

As I look at the back half of the year, stocks should be put to the test from here on out. Q2 earnings reporting season is on deck with most companies reporting their results after the 4th of July holiday. Without question analysts and investors alike will be focused on the health of corporate America and how they are growing their top and bottom lines. This should be one of the main factors on whether this powerful rally continues. The other wild card in the mix is the upcoming election. Depending on how things shake out between now and the actual election, this could have an impact of a “black swan” type event and if this is the case, then we could see one wild ride into year-end.

Good luck to all 🙂

~George