The Monday Morning Playbook: Week of August 12, 2024

Good morning,

Last week, my message was simple, “Don’t panic sell”.

While 4 days is not our time horizon, and I don’t yet see clear signs that volatility is over, that has paid off so far. If you panic sold the Monday open you missed out on a 4.2% recovery for the S&P 500 than put it close to flat for the week. If you rotated to core bonds, you did even worse, with the Agg declining 1.3% from Monday’s open.

Even from Monday’s close, all 11 S&P 500 sectors delivered positive returns while core bonds and Treasuries declined roughly 1%.

The payoff for putting our Blue Chip Hot List stocks on hold was substantial, with the 4 stocks we were “supposed” to sell delivering an average 5.6% gain from Monday’s close through the end of the week and the entire list climbing more than 5% on average.

And of course, Tuesday’s small rotation from bonds to stocks in the Balanced ETF portfolio is firmly in the green to start.

But what’s the call now?

With CPI, PPI, and retail sales on this week’s economic calendar, rates and the economy will be closely in focus.

Though part of the bonds-to-stocks rotation was the fact that yields were extremely oversold, I want to be clear that that call has already played out.

It isn’t a bet on what those reports will be or where rates will end next week. But after a 35 basis point low-to-high move on 10s last week, the oversold bounce has happened. We want to return to favoring the trend, which is firmly down on yields.

On stocks, it is more murky.