Are We Topping Out?

The last two months of the year are historically two of the most bullish.  However, in 2020, we’re already at toppy levels.  According to the chart below, the S&P 500 is only 2.3% from the all-time year-end two-month high of 13.57% set in 1954 which was during a multi-year period of economic prosperity:

With an increasing number of S&P 500 companies approaching previous, or establishing new, all-time highs while a significant percentage are suffering significant losses and laying off employees, valuations continue to get wildly high.  For example, The Walt Disney Company (NYSE: DIS) recently reported a quarterly loss of $710 million along with another 32,000 layoffs, yet the stock price is a mere 3% from it’s all-time high set a year ago.  Is a significant correction coming soon?  Who knows.  With proprietary trading desks, high-frequency traders and hedge funds increasingly dependent on volatility and panic selloffs to drive returns, it’s likely just a matter of time.  We also believe that a 10% correction at any given time for no particular reason is a common event in the stock market.

Forte Strategy Update

We executed two trades last week for a net loss of 0.3% compared to a gain of 2.3% by the S&P 500. Our YTD  results equal a 4.3% gain compared to a 12.6% gain for the S&P 500. Our YTD max drawdown is 9.5% versus 33.9% for the general market.    We continue to work on an overall portfolio approach to blend together a classic buy-and-hold strategy, our existing Forte strategy, and a new slow-trading Nasdaq strategy we’ve named Adagio.   We’ll launch this new strategy on the Collective2 website soon and provide more details on our portfolio research.

More details about our trading activity can be found by registering on the Collective2 website and searching for Forte Strategy. A running list of these email blogs and general information about Maestro Capital Research can be found at maestrocapitalresearch.com.

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