Important Market Update: October 10, 2018
In response to Wednesday’s market drop, below is a note to investors from Chadd Mason, Cabana CEO and Co-Founder.
I believe it is important to touch base with you today regarding the selloff we are currently seeing in stock and bond markets. In our weekly commentary on Monday I pointed out that conditions felt eerily similar to those experienced in February – when interest rates jumped dramatically in response to our Federal Reserve beginning to raise rates after a decade of accommodative monetary policy, coupled with prospect of sustained economic growth causing inflation. Click here to read Monday’s commentary in full. Those factors led to a swift and painful correction of more than 10% in our markets, erasing all the January gains and then some. Well, my feelings are proving correct and these same factors (rapidly rising interest rates and a continued hawkish position by the Federal Reserve) are causing another rapid and steep selloff. The Nasdaq is down nearly 8% in a matter of days. Industrial stocks are not far behind. As I pointed out in February and again Monday, the impetus for all this volatility is demand side growth rather than the selloff being the result of a credit crisis or failure in earnings. Thus, this is not 2008 by any stretch (at least in the United States). What does concern me is that while U.S. markets quickly recovered from the February correction and investors stepped back in, international markets have not recovered. In fact, almost all international equity and bond markets are down double digits for the year. I have commented on this disparity between the United States and the rest of the world numerous times over the past month. I did so again on Monday. We can’t be the only economy moving forward while everyone else is moving in the opposite direction. The trade war with China, coupled with overwhelming strength in the U.S. dollar, puts pressure on international markets – and emerging markets in particular.
We are monitoring this situation closely and, absent an unusually strong bounce over the next two days, our algorithm will reallocate to defensive positions to protect against further losses should this decline worsen. We will remain disciplined and faithful to our primary goal of striving to avoid losses and stay within the target drawdown of each of our portfolios. There will be plenty of opportunity to invest when the skies clear. Should anyone have questions or concerns, please reach out to our team.
Download a PDF of this commentary at the following link: Cabana Important Market Update October 10 2018
This material is prepared by Cabana, LLC, dba Cabana Asset Management and/or its affiliates (together “Cabana”) for informational purposes only and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed reflect the judgement of the author, are as of the date of its publication and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by Cabana to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Cabana, its officers, employees or agents.
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 https://www.adviserinfo.sec.gov/.
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 information regarding the ranking.