The week started ugly enough but was very encouraging after a strong rally - until today. Fears of default by Greece on its debt roiled Europe and sunk our market. The models generally held up better than the averages:
Top 20 lost about .83% in the holiday-shortened week, while the S&P 500 lost 1.64% roughly. We were helped by some improvement in Technology names as well as one of our Healthcare names. Most of our stocks are so beat up that perhaps they just got tired of going down this week. Despite the overall weakness, it looks like 5 names increased in price while 2 performed pretty poorly. I continue to have several potential trades under evaluation.
Conservative Growth/Balanced declined .48%, which was slightly better than the 1.02% loss in the benchmark of 60% stocks and 40% bonds. Technology helped cushion the decline on the week, with positive performance from all four of our names. We regained a slight advantage YTD relative to the benchmark.
Sector Selector ETF gave up a little ground, declining 1.97%, which was about 1/3 of a percentage point worse than the market. While our Emerging Market ETF had helped us last week, it gave up ground this week. Additionally, we continue to be hurt by exposure to Financials. As can be inferred from our small addition earlier this week, I am gaining confidence that the sector will rebound shortly.
Market Outlook
I am very frustrated by the continued high volatility (translation: the market moves down a lot, as I don't mind "up" volatility), and the progress since the depths of this correction remains unsatisfying. Still, we have stabilized over the past month, even if it doesn't quite feel like it. I wasn't feeling any more bullish near the highs last week or even early yesterday, and I am not feeling any more bearish today despite the rough finish to the week. I continue to believe that there is a decent chance the lows are in and a most likely case that despite the potential for modestly new lows later this month or in October that we will recover during the 4th quarter. Still, I am cognizant of the risks of contagion. Overall earnings estimates aren't yet coming down, and I have heard a few relatively upbeat though cautious comments from some Industrial companies this month. So far, this remains more about a fear of a slowdown than a reality. This week is quadruple expiration of options, so we should expect the volatility to continue.
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Please take a moment to remember the victims of 9/11 this weekend and to be grateful for the resilience of our great country.
Regards,
Alan Brochstein
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