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Hear from Chief Investment Officer Jesse Mackey in this week's Market Perspective.
I’m Jesse Mackey, CIO of 4Thought Financial Group, and this is 4Thought’s Weekly Market Perspective for the week of September 15th, 2020.
After a minor but steep pullback from its newest September 2nd record peak during the last week and a half (which has so far maxed out at about a 7% drop), the S&P 500 Index of US large cap stocks still remained only 0.30% below its February 19th, 2020 prior Bull Market peak as of the close of business yesterday.
Preceding this move, the rapid recovery from the 2020 Bear Market low point on March 23rd (at which point the S&P 500 had dropped more than 34% from its previous peak) met our technical definition of a new Bull Market. Historical data indicates that once a new Bull Market has been confirmed (which happened on August 18th), the shortest time period on record (since 1950) before the beginning of another Bear Market was approximately 4.4 months, and the longest time on record was approximately 10.7 years, with the average coming in at about 3.2 years. Only 27 days have elapsed from the point of Bull confirmation in this instance so far.
From a probabilistic analysis perspective, stock types range from slightly undervalued (such as with mid cap stocks) to moderately overvalued (in the case of large cap growth stocks). Bond types range from near fair value (in the case of emerging markets bonds) to moderately overvalued (in the case of Treasury Inflation Protected Securities and Long Term Treasury Bonds). Against this backdrop the outlook for stocks is now neutral in the intermediate term based on the overall aggregate of our historical market-type data analysis and quantitative probabilistic analysis.
Treasury Inflation Protected Securities are now the best performers so far in 2020, while US small cap stocks show the worst year-to-date performance. US mid cap stocks now reflect the most attractive pricing relative to the alternatives, while US large cap growth and tech stocks are by far the least attractive. With regards to allocations amongst investment methods, we are now allowing overweight allocations to Liability-Driven Investing, neutral allocations to Strategic Asset Allocation, and underweights to Selective/Concentrated Investing, and Opportunistic Investing.
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