April showers will bring May flowers!
We are seeing some heavy rains here already as we exit March into April. Just as we are seeing the conflict in the middle east with the U.S. and Israel versus Iran pouring water on the markets and economy. But much of this market is news driven, rather than moving on real investment fundamentals. As such, we are keeping this months’ e:News shorter until we achieve some clarity and will simply stick to our charts and strategy to keep us potentially protected.
We are surprisingly in the Green Zone in our mid to longer term Equity Action Call given that markets are all down. But they are not down as much as some would have thought or that the media would have us believe.
In the shorter-term and in our charts and signals we utilize however, have us in a Red Zone and very much on the defensive. Fortunately, that move to defense has kept us in positive territory in our equity component of the accounts, up approximately 4.5% while the US markets are all down (and only) about 5-7% and the Canadian market up just 2.5% (as of the close of Monday March 30th).
So, although the U.S. markets are down, and that they are all below their important moving average lines we look at, thus putting us on defense and further that they have been indeed turbulent, even occasionally volatile, they have managed to be rather resilient. Markets are not as yet in what is known as “Bear” territory –where markets would be down the 10 – 20% range as we saw this time last year. That is very much unlike what the media would have us believe. The price of energy is up, yes. But still not as high as we saw say back in 2021-2. Inflation has increased with that oil price increase, and to some small extent with the tariffs, but it is still at a rate lower than we saw towards the end of 2024.
Bad News Sells
What has changed a lot is the news feeds. Back and forth. Back and forth. We continue to be bombarded with news from Trump tweets, from pundits on both sides of the aisle, from various sources out of the mid east and around the world and much of it exaggerated as always to sell the news or push some agenda.
As of writing here on Tuesday (March 31st), we are seeing a bounce higher given a report Trump told aides he is willing to end military campaign against Iran even if Strait of Hormuz remains largely closed. That also plays into Trump's push for more countries, especially NATO allies, to get more involved. On the other hand, it also highlights the lingering supply chain risk (oil, fertilizers, commodities). In addition, the situation on the ground remains concerning, as Iran struck a fully laden Kuwaiti oil tanker off of Dubai. And that follows a recent pickup in threats from both sides surrounding key infrastructure in the region (Reuters). Iran continues to be a problem in the Strait of Hormuz and now we are also seeing the Houthis beginning to step it up again:
As the Middle East conflict roils the global economy, Yemen’s Houthi militants are adding another level of risk. With the US-Israel war against Iran now in its second month, Tehran’s leadership is urging the Houthis to prepare for a renewed campaign against Red Sea shipping. That’s as its own chokehold on oil and gas deliveries through the Strait of Hormuz has sent global energy prices soaring. All indications are that leader Abdul Malik Al-Houthi is laying the groundwork for more involvement, though there are still some internal divisions about how far to go. Two days before the Houthis fired ballistic missiles at Israel on Saturday and vowed to do more if attacks against Iran and its Lebanese proxy Hezbollah continued, Al-Houthi delivered a televised speech that made the case for joining the battle.
- Bloomberg
So, we have seen a lot of markets up one day, down the next. We are not trying to minimize the conflict by any means. There are serious concerns. But again, for the markets, it is all very news driven markets. And even still markets, are only down moderately since topping out at the beginning of the year.
Bottoming out?
All that said, markets are at this point at an over sold conditions. That could get worse indeed, but some sort of bounce is expected. Possibly even towards a turnaround. We may even see a bottom forming soon. We will NOT however look to add to our stock exposure until we see some consistency in our indicators advising any upside is more than just that oversold bounce. We will be looking for a true market reversal, as markets can remain oversold for a long time. Nor will we be driven by the newsfeeds as they seem to change every minute.
What does defensive mean for us?
We are only about 35% in actual company stocks (and or exchange traded funds of stocks) and those are typically assets that everyone is still using no matter the market, such as Walmart and Costco. The rest of the portfolio is all in assets that are acting to protect us on the downside such as gold, oil (of course which is rising), and of course cash (mostly in the form of short-term bonds or High Interest Savings). As always, we would rather risk missing some upside, than catching the potential falling knives.
Bottom Line: We are in the Green Zone mid to longer term which tells us that markets have not completely broken down. So far, the volatility is short-term, and we are positioned accordingly.
As this market remains news driven, we may provide another update within the next week or two as we obtain some more clarity. Should you however have any questions or concerns, or would like to discuss your portfolio or plans in more detail, please contact us anytime.