04-23-2020: This Looks Bad Even Assuming the Best

With regard to the issue of opening up the country, I lean toward the herd strategy, but making that decision is way above my pay-grade. Let's assume the sharpest knives in the drawer are in charge of getting America open for business again. And, let's further assume that they pick the best strategy to end the lock-down. While we are assuming away, let's also assume that the lock-down ends, nation-wide, by June 1 (reasonable guess at this point, although some think it will happen sometime in May). And, finally, let's assume that the number of people having to go onto ventilators is no worse than what we see from the flu each year.


You might think that if the above actually happens, the economy will boom and the V-shaped recovery will be a foregone conclusion. Let's hope so... but, I am far from convinced. You see... I happen to think there is a high degree of probability that even if the best possible scenario occurs with regard to the virus, our economy is already past the tipping point of a V-shaped recovery. And, I truly hope I am wrong in that thinking.


But here is the good news... it doesn't matter what I think... it doesn't matter if you believe it will happen as described above or if you are convinced it will be better or worse than I have described. If you are like 90%+ of all professional investment advisors, you are betting the proverbial farm that the market is on the verge of an explosion higher (at best) or a 'Nike-Swoosh' (at worst). That could be a great bet, but what do you do if another scenario develops? What do you think happens to the market if half or more of all the small businesses in the US don't come back... ever? What happens to the stock market if oil companies start filing bankruptcy? What if this virus is 100 times more contagious than the flu? What if people are still afraid to fly, to go out to restaurants, or football games, or baseball stadiums or large gatherings of any kind for another year... or another two years? What if just 'some' of these concerns actually occur?


You see... at this point, no one knows. You can certainly hope for the best; I do. But, if you are invested according to the rosiest outcome, you are taking on a LOT of risk. And it doesn't matter what the only-fundamentals-matter-advisors have to say... they are just guessing. And, speaking of fundamentals... do you really think the fundamentals for companies are going to be better in Q2 or Q3 or Q4? Here's a great question for the only-fundamentals-matter crowd... if only fundamentals matter, why are those fundamentals going to be ignored for the next 3 quarters? Almost all of the buy-and-hold advisors are telling their constituents to forget about 2020 and concentrate on 2021 "when the economy is back on track". That's a great fairy story, but it requires that you completely throw away any semblance of common sense. No one knows what this economy (and by extension, the stock market) will look like in the next 90 days; much less the next year. Ignoring the stock market for another year is worse than playing Russian Roulette with your financial life.


For my clients, we have an investment approach that does not rely on guessing or hoping or believing in fairy tales about good times in 2021. Instead of guessing what the market is going to do, we rely on what the market is doing. Right now, the market is in a bear-trend, based on the 200-day moving average of the Turner Capital "Composite Index". That means the current bearish trend will (with 100% accuracy) continue trending lower until it stops trending lower. That means my investment bias is bearish until the 200-dma flattens (when I start moving to cash) and then I shift to a bullish investment bias when the 200-dma begins trending higher.


My advice to you, if you are not a client of mine, is to get your portfolio prepared for the worst and, at the very least, have stops in place to handle a massive move lower. If the worst doesn't occur and the market moves into the so-called 'V-shaped' recovery, you can ride that trend up, but when it does, you should continue to move your stops up, as well.


Today, I added a little more gold in my Tactical Growth strategy... and picked up some high-yielding oil storage tankers in my Diversified Income strategy. If the market had gotten up 2% today, I would have added more inverse ETFs in my Ultra and Ultra-Max strategies. Why? Do I think the bottom is going to fall out of this market? Remember... It doesn't matter what I think. The market tells me what my investment bias should be... and nothing else. The market is screaming that it is in a bearish trend and, unlike the rest of us, the market is never wrong.

Turner Capital

Call Us! We are the money management firm you have been looking for!
Quant-Based, Market-Directional Portfolios

1-855-678-8200

Austin, TX

©2019 Turner Capital Investments. All Rights Reserved.