The last month has not been kind to the Dow nor the S&P 500, as both have started trending lower amid soft retail sales and manufacturing data.
It would appear as if the only thing supporting financial markets and stock prices higher are corporate buybacks and low interest rates/cheap money, both of which will come to an end sooner rather than later. There has already been speculation on whether or not we are currently in the early phases of a recession. As recessions are only validated in hindsight, only time will tell, but the economic data is not doing the US economy any favors.
Hedge funds have had a rough year. We have commented on how hedge funds have experienced significant capital outflows over the last 18 months, and on top of that performance has been weak. Take a look at Sequoia Capital, whose fund is up 10% in the last year. They would be -20% if it weren’t for their position in Valeant Pharmaceuticals saving the fund from a loss. When one security provides such a cushion for your portfolio, it shows that deeper problems may be at play.
Lastly, we are closely watching how Apple will respond this week after the markets received word on Friday that Berkshire Hathaway took a significant stake in the company’s stock at the urging of one of Warren Buffets traders. While Apple’s performance in the near-term has been poor due to declining iPhone sales, the stock got a nice bounce at Monday’s open.
It is our job to look beyond the Dow and S&P 500, or Apple or Sequoia to see where the economy is headed, and most signs are pointing towards the 7 year bull run coming to an end. To learn more about where we see opportunities in the markets, the services that we provide, or for a free portfolio analysis, please call us at 1-800-624-5597 or reach out to us through our contact us page.