"To think is easy. To act is hard. But the hardest thing in the world is to act in accordance with your thinking" - Johann Wolfgang von Goethe
(The NorthCoast Navigator is a market "barometer" displaying NorthCoast's current equity outlook. This aggregate metric is determined by multiple data points across four broad dimensions including Technical, Sentiment, Macroeconomic, and Valuation indicators. The daily result determines equity exposure in our tactical strategies.)
On October 15, the combination of 40+ data points we monitor continued to display a bullish environment and an opportunity to make money in the near-term.
Macroeconomic data: Strong
Valuation levels: Improving
Sentiment: Positive
Technicals: Weakening but steady
But as of October 15, the S&P 500 had fallen roughly 9% from its high on September 18. Equities were extremely volatile. Of the first eleven trading days (through 10/15), seven experienced either an advance or decline of over 1%; Five negative and only two positive. Clients were fearful and news headlines were abuzz. Once the fear subsided, equities rebounded and ended the month +2.4%, and +10.4% YTD.
Throughout the volatility, NorthCoast remained grounded in its analysis which indicated a bullish market environment. A few strategies even added exposure as attractive entry points opened up. Short-term corrections are inevitable and the recent decline only solidified our position that over time, data and discipline will outperform gut reaction and opinion.
With the sharp advance in equities (S&P 500) over the past two weeks, some of our indicators have now weakened, and as the dust settled from a wild October, we moved back into an 'Opportunistic' market environment. As a result, we reduced the equity risk exposure across our tactical strategies to roughly 80%.
We will continue to monitor these developments each day and make necessary adjustments when warranted.
- CHART OF THE MONTH -
On October 15, the VIX Index (~ fear Index) reached its highest point over the past two years. As seen below, while the VIX makes quarterly incursions into this territory, in each instance the market pulls back before resuming its ascent after fear subsides and the VIX normalizes.
Did you miss the Quarterly Advisor Webinar? On October 14, President & CEO Dan Kraninger led an interactive Webinar recapping Q3 and providing insights into the final quarter of the year. You can listen to the recording by clicking on the question above. Don't have the time for the 30-minute Webinar? Review the PDF Overview here.