Market Strategy Radar Screen Chartbook - February 2016

Where ordinarily our monthly chartbook is updated through the end of the prior month, markets and events have moved so quickly that January 31, 2016 seems stale to us. In addition, movements in some currencies and commodity prices seem to have passed or are possibly near inflection points. Thus we’ve updated many of our charts to incorporate the first six trading days of February.

By the markets’ close on Monday, February 8, 2016 the S&P 500, the Dow Jones Industrials, and the NASDAQ composite were respectively off 9.3%, 8.0% and 14.5% year-to-date, with technology stocks among the hardest hit. In addition, we believe the market has suffered from a trend to rotate out of last year’s winners and into last year’s laggards with an eye to adding defensives and select opportunities in lagging cyclicals.

The price of oil ended the day on February 8th down 19.8% yearto-date while the dollar (as measured by Bloomberg’s tradeweighted basket DXY) over the same period was down 2.1% yearto-date, and was down 3.7% from its 2015 high on March 13.

Curiously the weakness in the dollar of late was not accompanied by a boost to the price of oil. That countertrend occurrence between the dollar and the price of oil we’d think is worth noting as it could be a harbinger of things to come as the price of oil finds a level that it can settle to and the dollar has opportunity to move somewhat lower from its current level of strength.

Are we nearing an inflection point? From our perch on the market radar screen it looks like the currency and commodity markets are beginning to seek a change of direction from their paths in 2015 (commodities moving lower, dollar moving higher) to what may develop this year.

That said, we believe that for all the hubbub, noise and confusion that may have surrounded the market’s moves over the past few weeks, it may actually be pointing to a better market environment ahead.

In our view, we remain in a period of price discovery as oil prices seek stability in an environment wherein producers become more efficient at finding and producing energy while their customers—the consumer, businesses and government— at the same time become more efficient in using energy.

Similarly, as a result of technological advances in the workplace, retraining and repositioning among the workforce will be essential in “gaming” the new technologies to achieve greater job stability and compensation in the workplace. For business owners and investors, an understanding of how the landscape is changing will likely be key to success.

From our perspective on the market radar screen, we continue to believe that the market has made significant progress in regaining lost ground, but expect that we are not quite out of the woods yet.

Shopping lists, stock screens, investment manager reviews and searches are the order of the day in positioning ahead of the next market-moving catalysts’ arrival on the scene.

Know what you own, why you own it and how it is likely to perform in a variety of scenarios is our current mantra. The increased volatility experienced in the market of late leads us to believe that risk management is likely to regain popularity. Investors will need to allocate assets and diversify portfolios and position for exposure in 2016 that reflects a barbell approach wherein both growth and value are deployed with exposure to dividend growth where possible.