(602) 697-3890 Jerry@JGMFinancial.org
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June 10th, 2019

Below is a snapshot of last week’s market performance and what to watch in the weeks ahead from Chadd Mason, Cabana CEO and co-founder.

Last week’s commentary noted that the stock market was at a critical juncture. All relevant U.S. indexes had fallen below their respective 200-day moving average in the face of the escalating trade war with China, coupled with new threats of tariffs on all goods imported from Mexico. I pointed out that the equity markets’ ability to quickly recover was important. Stocks were hammered in May and as of last week were oversold and ripe for a bounce from a technical standpoint. If buyers didn’t step in quickly, we were in danger of significant further declines over the next few weeks.

Well… I do not claim to be psychic, but last Monday’s commentary was followed up by a four-day rally, which continues today. All major equity indexes ended last week above their 200-day price averages and are once again on solid ground. The small cap index is the only exception. I would also note that the transportation index is lagging. This makes sense given it is a direct reflection of goods being shipped worldwide. Transportation is ground zero of the trade war. We will watch to see if that sector of the economy gives us any hint on the future outcome of the tariff issues.

Interest rates got a corresponding bounce, which caused a pullback in bond prices. However, with interest rates near all-time lows, dividend paying stocks, bonds, REITs and bond substitutes (like utilities) remain very attractive. Federal Reserve Chairman Jerome Powell intimated on Wednesday that a rate cut may be forthcoming in order to deal with the headwinds caused by increased taxes on goods being imported/exported. We received a tame jobs report on Friday, which further supports a dovish Federal Reserve stance on interest rates. It looks like the Fed is once again signaling a backstop on falling stock prices. I won’t get into the ongoing debate over whether this type of monetary intervention is good for the long-term health of a capital economy, but it certainly emboldens investors to keep their money in stocks.

At Cabana, we avoid investing based upon predictions, as well as investing based on how things “should be”. We play the game as it is laid out in front of us. We remain moderately bullish.

IMPORTANT DISCLAIMERS

This material is prepared by Cabana, LLC, dba Cabana Asset Management and/or its affiliates (together “Cabana”) for informational purposes only and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed reflect the judgement of the author, are as of the date of its publication and may change as subsequent conditions vary. The information and opinions contained in this material are derived from    proprietary and nonproprietary sources deemed by Cabana to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Cabana, its officers, employees or agents.

This material may contain ’forward looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy. All investment strategies have the potential for profit or loss. All strategies have different degrees of risk. There is no guarantee that any specific investment or strategy will be suitable or profitable for a particular client. The information provided here is neither tax nor legal advice. Investors should speak to their tax professional for specific information regarding their tax situation. Investment involves risk including possible loss of principal.

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