As I write this, it is Thursday after the close, July 9/2020. The S&P as represented by the SPY (spider) closed to at 314.12. That’s down just 10 points and thus about 3% on the year. Given that in the middle of March the S&P was at 222, the rebound has been nothing short of a remarkable, V-shaped bottom. Let’s show our SPY chart with the algo attached, since most of you have this in your portfolio:
Flip users with the “SP Benchmark” in their portfolio were able to avoid more than 50 points of the drop and re-enter the market at a tactically defendable place during the despair of the market back in March – and participate in the “V”. Not only has the broader market recovered, but the Nasdaq, as evidenced by the QQQ, by comparison is at new all time highs and continues to move higher:
This is because in a world now navigating covid, the stocks that profoundly represent the Nasdaq are perceived to be able to flourish e.g. Apple, Nvida, Amazon etc.
I’m a believer that AI and the math inside has the ability to navigate the market better than any human. Personally, I feel the market may not be factoring all the risk associated with a potential Trump defeat (Roe’s Note: Perhaps change this to “Administration Change” in November? But if you want to keep it within your own personal opinion then it’s fine) in November, and a prolonged worldwide battle with covid prior to a vaccine, which isn’t likely to happen until after the election. A Trump defeat means an end to the corporate tax cut, reducing earnings and thus cutting stock prices. Moreover, prolonged covid issues, vaccine or not. will cut demand and that also means less earnings. On the plus side, we have worldwide central banks stimulating demand by moving rates to zero and fiscal policy calling for more stimulus checks. Given this, I feel the market is going to be in a holding pattern and at the mercy of the news of the day until closer to the election.
So.. What’s next ?
In a phrase: let the math work. Hold your strategies and your symbols. There is only about 3% risk on the downside at current levels of the SPY for those of you that have the benchmark algorithm. That’s a risk worth taking. If you think there will be a recovery in the next couple of years, Trump or no Trump, the volatile RedOil and SPY I index models will perform best. Oil stocks look good despite their recent retreats from highs as they want to maintain dividends and at current levels represent good long term value. If you feel that Trump will not be re-elected, the algorithms will manage the downside in the SPY and it may be time to consider lowering exposure to the high flyers e.g. Apple, Amazon etc. Regardless, Flip’s AI product does manage risk and will protect your portfolio in a sustained downturn.