Year-to-Date Strategy Stats as of today:
+ 38.89% : Turner Quant Advantage (TQA)
+ 13.58% : Tactical Growth (TG)
+ 2.13% : Diversified Income (DIS)
+ 18.25% : Leveraged Index (LI)
+ 6.07% : S&P 500
Well... Today, Lucy has the football teed up for Charlie Brown, one last time, to kick and this time Lucy is assuring Charlie Brown that she will not pull the ball away at the last second and fool good 'ol Charlie Brown once again. Count me dubious.
If you don't know who represents Lucy, the football and Charlie Brown (although I am sure you know), I'll give you a hint: Pelosi is Lucy; the relief bill is the football; and, the desperation hope of millions of Americans that they can hold on financially, until our great Nation can get back on its feet is Charlie Brown. We should know today if Lucy and Mnuchin can agree to terms; meaning, the football will not be pulled away at the last second. I am of the mind that Lucy has put multiple poison pills in the deal so as to make it virtually impossible for the Senate to agree with any Lucy-deal. Why are there deal-killers in the bill? Lucy is willing to sacrifice the financial lives of millions of Americans and many thousands of small businesses in order to not give Trump a win before the election in two weeks. This is politics at its worst in full display, whether you are on one side of the aisle or the other.
I know what you (some of you, anyway) are thinking... "C'mon man... you're supposed to be writing an investment blog, not another off-the-wall political commentary!" And that is true, but this is not about politics, actually. This is about the stock market, which is tied inexorably to the economy and the economy is inexorably tied to financial backbone of this country; small business. Small businesses and millions of out-of-work Americans need some financial help. Our economy is a long way from being out of the COVID-19 woods.
Sure, the likes of UBS (BIG business), Google, Amazon types are booming. But, the rank-and-file side of the economy... the real economy... appears to be hanging on by a thread and that thread could break today if a deal is not reached with 'Lucy-in-disguise'.
As you know, I went 100% to cash last week in anticipation of wild market swings prior-to and immediately-after the election. Yesterday, the market was down hundreds of points and this morning, the pre-market is up a couple hundred points as the market is hoping that Charlie Brown will finally get to kick the football and that Lucy will not pull it away at the last moment. Betting on Lucy to do the right thing is just too risky for my taste. I'll let the high-risk investors play that game and I hope that they are right. I hope that Lucy does the right thing. If she does, we might just keep this economy from falling off a cliff. But, since the sitting president is hurt when the economy is bad, I am not holding my breath that Lucy cares one whit about the real people who so desperately need help so long as the president's chances for reelection are diminished.
If a deal is reached and the market booms higher, that is a good thing and I am all for it; even though we are 100% on the sidelines. Why?? Because the real market roiling event will be the result of the election in just 2 weeks. Now that SCOTUS has ruled that counting votes can take longer than one night, the election will likely not be settled for days. Then, there are likely to be a multitude of lawsuits that will ensue; perhaps dragging the decision of who our president will be for the next 4 years into weeks or longer. Since there are huge, life-changing, differences between the left-and-right's approach to our economy, I suspect the market will swing wildly as each side wins some and loses some in the post-November 4 results.
Then, add to the above milieu, a potential resurgence in COVID-19 cases; the specter of more shut-downs; the potential of a recession turning into a depression and it is not beyond the realm of speculation that we could see a market correction of historic proportions. But... and this is why we are 100% cash right now... it could all go the other way and the market/economy could boom higher. The risk is simply too high to guess one way or the other when it comes to growing AND protecting investable capital.
My plan is this: Let the post-election future unfold as it will and then put capital to work accordingly. If the market wants to boom higher, we will put capital to work in a bullish investment strategy. If the market wants to trend into oblivion, we will put capital to work in a bearish (inverse ETFs) investment strategy. If the market wants to move into a frenetic, wild series of rip-your-face-off whipsaws, we will move into a transition-type investment strategy and stay more in cash (depending on the portfolio model, of course).
We do not guess what the market will do... we react to what the market is doing and how it is trending. This keeps us closer to being on the right side of the market and helps us avoid being on the wrong side of the market.