The Week in Review: Market Commentary from Cabana’s CEO – November 5, 2018

Below is a snapshot of last week’s market performance and what to watch in the week ahead from Chadd Mason, Cabana CEO and co-founder.

U.S. stock markets closed out the month of October with the largest monthly losses we’ve seen in more than six years. All of 2018’s gains were essentially wiped out over just a few days of trading. Bond markets have been hurt all year as interest rates have continued to rise precipitously on the back of strong employment numbers. Investors are now worried that the future costs to service debt will halt the demand side growth we finally began to see after the financial crisis. I wrote last week that it appeared market participants were positioning themselves for things to get worse, not better. I also explained that we had a huge batch of earnings coming in and the response to those might very well dictate the end of this bull market. I said the proof would be in whether investors bought or sold the inevitable bounce in stocks from deeply oversold conditions. We saw the bounce over the past few days and Friday investors sold into it. While one or two days, or even weeks, does not make or break the stock market, this fact is not a good sign. The 200-day moving averages are now acting as resistance for major indexes, just as they once offered support prior to being broken. The October pain is not over and a fourth quarter rally cannot occur until those important moving averages are reclaimed. I spoke at an adviser event early last week and pointed out that almost 80% of all U.S. stocks were trading below their 200-day moving averages. This has been the case all year for foreign equities and it is coming home to roost. This old bull market is not dead and earnings are good, but I believe the best is likely behind us. We have seasonality in our favor and a bounce may very well occur as we close in on the end of the year, but I am concerned, and at Cabana we are defensive. We remain cautiously bullish – very cautiously bullish.

Download a PDF of this week's market commentary at the following link: Cabana Weekly Market Commentary November 5 2018

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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.

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