White Oak Financial Management, Inc. is happily celebrating 20 years in business this year, and we are so lucky to be serving our wonderful clients. We think we have the best clients in the world and appreciate the continued trust and confidence in good times and tough times. We always have your long-term success towards your goals in mind.
Since 2022, the investment markets have not made much sense. Continuing to adhere to the technical charting method I’ve used successfully for 20 years, in the face of a bear market and possible recession, it has been frustrating to stay in a wealth preservation mode and holding a high percentage of cash because of it. Keeping so much in cash means that we are still sitting on much of the losses of 2022 and therefore have not fully participated in what small recoveries have occurred. At this point, it seems clear that the markets are undergoing a period of consolidation. As to what’s driving this period of consolidation, there are no definite answers. The fact that bonds have seen a similar period of rangebound trading suggests that the cause isn’t something unique to equities. From an economic perspective there is a significant amount of uncertainty – will the Fed raise rates again? Will the debt ceiling impasse be resolved? Is the US economy headed for a recession? It seems plausible that many investors may be waiting for more clarity before taking on new positions, and large institutional investors are also keeping large amounts of cash waiting on the sidelines. Whatever the cause, we will be ready and keep an eye on our indicators as periods of consolidation like this are often followed by large breakouts … to the upside or downside.
Over the last two months, roughly since the collapse of Silicon Valley Bank, there has been a noticeable bias towards growth when compared to value. While the recent leadership by growth and improvement from offensive sectors such as technology are positive signs for the market, there has been a serious lack of breadth recently. This means that an index may be rising while more than half the stocks in the index are falling because a small number of stocks have such large gains that they drag the whole index higher. Market breadth indicators can reveal this and warn traders that most stocks are not actually performing well, even though the rising index makes it look like they are. That is what is currently taking place. Right now, we are in a bear market rally, and just five big names are responsible for much of the S&P 500 index upward movement: Microsoft, Amazon, Google, Tesla and NVIDIA. These five stocks together now represent over 23% of the capitalization of the S&P 500 index. This may help to explain why the market has been relatively stagnant in recent weeks. There are contradictory themes in the market – the outperformance of growth and relative strength gains by offensive sectors versus the lack of broad upside participation outside of mega-cap names.
As ever, our goal is to attempt to protect our client assets when wealth preservation is indicated, and the odds are not in the investor’s favor, and to participate fully when the odds appear to be in the favor of investors and the goal of wealth accumulation is indicated by our method. It’s not always easy, but our promise is to practice risk management of your assets at all times.
Let us know if you have any questions or concerns. We are always happy to talk with you.
