August 2017 Advisory Commentary

Post Series: Advisory Commentary

The markets continued to push forward in July, with outsized gains in most of the broad indexes. Volatility also continued to drop across the board as we’ve seen an unusual amount of correlation between many different asset types.

The general level of earnings reports has been well received this season, with one notable divergence. Companies that have beaten their earnings estimates have not been rewarded with higher stock performance relative to the overall market, as is usually the case. While it may sound foreboding, this type of activity has not been seen since the late stages of the market just preceding the technology-led market crash of 2000.

Another potential sign of market disruption is the underperformance in the Russell 2000 small cap stock index. This type of movement often precedes the broader market lower, as it generally contains the more aggressive category of growth stocks that lead the markets higher inside of a bull market run.

From a technical standpoint, we continue to see a negative divergence in the number of stocks that are pushing the broad indexes higher. In the healthiest of circumstances, we would like to see broad participation from a large category of stocks and industries moving the market higher. This measurement continues to show trouble below the water. It could be telling us that the market’s run up is losing some of its steam.

Brian Weckman, RFC
Chief Investment Officer
Actis Wealth Management L.C.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The economic forecasts may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

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