Monday Morning Market Insights: Last Week in Review with Rusty Vanneman, Vol. 5

Happy Monday and welcome to February!  

What a Week (And Month) in the Markets

Besides the drama of GameStop (more on that in a moment), January was a month of impeachment, inauguration, and market insanity. The market also suffered its worst weekly loss since October during the last week of the month. Despite all that, the overall stock market essentially finished unchanged to slightly lower for the month. Some parts of the market did well though, with small caps and emerging markets each up about 3% in January, for instance.  

The 3-month return for the market, basically since the Election, is a gain of about 16%.  During that time, small caps are up 29% and emerging markets up 21%.   

Since August 4th, when the 10-year Treasury yield bottomed, the U.S. market is up 19%, while small caps are up 39% and emerging markets are up 29%. 

And now for the fun numbers: Since March 24, when the stock market bottomed after the bear market nearly a year ago, the U.S. stock market is up 75%. Small caps are up 103% and emerging markets are up 81%. 

Now consider what will likely be the case (assuming the stock market doesn’t materially correct), how much the stock market’s trailing 1-year historical return will pop higher once the dramatic negative returns from last Feb/March’s bear market rolls off the returns. The 1-year return for the stock market will rank as one of the best ever. 

Let’s Talk GameStop

There has been a lot written about this already, but I believe the story is important because it’s a fascinating example of investor behavior, something that all of us as advisors—or investors—care about. As advisors, we have an incredible opportunity to do what we do best: Be counselors. 

There has been a tremendous swell of interest and new investors coming into the markets.  We have the opportunity to educate and hopefully nudge investor behavior in the right direction. As long-term investors, however, we realize this is a story we’ve heard before and it’s a game we don’t need to play.   

Looking Ahead

Regarding a market outlook, being cautiously optimistic and investing in diversified portfolios remains the best course of action in my opinion, as there are powerful arguments for being both bullish/optimistic (“Things Are Getting Better,” “Don’t Fight The Fed,” and “Don’t Fight The Tape”) and for being bearish/cautious (valuations show that stocks are expensive by historical standards, and investor sentiment is “too hot” in some cases, suggesting future below-average market returns). 

COVID data seems to be, on balance, improving.  While the news of a new strain(s) isn’t positive, the overall rate of cases, hospitalizations, and deaths is currently going down.  And there have now been over 27.3 million vaccinations given in the USA, with the daily average up to nearly 1.3 million doses, according to the CDC.

As for what to watch for this week, besides the price action of GME, the highlights include Big Tech earning reports with Alphabet (GOOG), Alibaba and Amazon on Tuesday.  On Friday, we get the monthly jobs report, arguably one of the most important, if not most important, economic numbers to watch given its potential impact on monetary and fiscal policy.  Expect to see a rebound in job growth after December’s poor number. 

It’s Super Bowl Week!

This year’s game is loaded with storylines and has a great cast of characters.  That includes Tom Brady, the quarterback for the Tampa Bay Buccaneers.  Brady is apparently one of the only things still working in our country! 

College basketball’s top 5 only had one change, swapping out Big 10 powerhouses Iowa for Michigan in the current Top 5 of Gonzaga, Baylor, Villanova, Michigan and Texas. By the way, my wife, and virtually her entire family going back generations, are University of Missouri grads and they sure seem to take a lot of pride being ranked higher (#12) than Kansas (#18 in coaches poll) in the current polls. MIZ – ZOU! (I’ve been trained well). 

Two Pieces of Timeless Advice

Let’s wrap up with a few sayings from stock market legends that seem like good reminders given the current market environment:

“There is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market to-day has happened before and will happen again.” Edwin Lefevre (otherwise known as the famous trader Jesse Livermore)

“Keep things simple and don’t swing for the fences. When promised quick profits, respond with a quick “no.” 

Warren Buffett

 

Have a great week! For more insights and commentary, visit our Financial Advisor Success Hub.

 

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The CFA is a globally respected, graduate-level investment credential established in 1962 and awarded by CFA Institute — the largest global association of investment professionals. To learn more about the CFA charter, visit www.cfainstitute.org.

The CMT Program demonstrates mastery of a core body of knowledge of investment risk in portfolio management. The Chartered Market Technician® (CMT) designation marks the highest education within the discipline and is the preeminent designation for practitioners of technical analysis worldwide. To learn more about the CMT, visit https://cmtassociation.org/.

About Rusty Vanneman, CFA, CMT, BFA
Rusty Vanneman serves as the Chief Investment Strategist for Orion Advisor Solutions. An industry veteran with more than 30 years of investment experience, Rusty creates relevant market- and platform-related content that supports deeper, more engaging conversations with advisors and investors, educating key internal and external audiences on Orion Portfolio Solutions’ strategies and resources to help deliver favorable investor outcomes, and helps identify new investment offerings to meet growing marketplace demand.  Rusty is a host of Orion’s The Weighing Machine weekly podcast, Orion’s monthly Weighing the Risk podcast, and authored the book “Higher Calling: A Guide to Helping Investors Achieve Their Goals.” Rusty has managed multiple mutual funds and hedge funds during his career and was named one of the Top 10 Portfolio Managers to Watch by Money Management Executive.* Prior to Orion’s acquisition of Brinker Capital in 2020, Rusty was the Chief Investment Officer for Orion Advisor Solutions and prior to that was the President and Chief Investment Officer of CLS Investments.  Before joining Orion in 2012, Rusty served as the Chief Investment Officer and Managing Director for a multi-billion-dollar registered investment advisor (Kobren Insight Management) in the greater Boston area. His 11-year tenure at the RIA included a five-year span when the firm was owned by E*TRADE Financial where he also served as the Senior Market Strategist for E*TRADE Capital. Prior, Rusty was a Senior Analyst at Fidelity Management and Research (FMR Co) in Boston. Additional work experience includes Thomson Reuters, General Electric, and as a cattle ranch hand in the Nebraska Sand Hills. Rusty received his Bachelor of Science in Management from Babson College in Wellesley, Massachusetts, where he graduated with high distinction. He holds the Chartered Financial Analyst (CFA®) designation and is a member of the CFA Institute. He is also a Chartered Market Technician® (CMT) and is a member of the Market Technician’s Association (MTA). He is also a Behavioral Financial Advisor (BFA). *RUSTY VANNEMAN MONEY MANAGEMENT EXECUTIVE AWARD. Rusty Vanneman, CFA, CMT, was selected as a “Top 10 Fund Managers to Watch” in 2017 by Money Management Executive. Money Management Executive is an unbiased, third-party publication covering the asset management industry. Money Management Executive chose the list of managers to watch by screening Morningstar data from funds with a single manager, ranked as having the best three-year annualized returns in their respective categories. The list of managers was published March 27, 2017. Money Management Executive is not affiliated with OPS. Ratings and awards may not be representative of any one client’s experience and are not indicative of OPS’s future performance.