After a strong start to the week, the markets have sold off the last two days. Importantly, the S&P has now fallen below support. Intraday moves are not as important as closing prices, so we will be watching to see if the S&P can recapture and hold above support later in the day. If not, it will be important for the market to rally next week to stay out of the malaise of the longer-term trading range the market has been embroiled in over the last 4 months. For now, the decline is orderly and minor but a trip down to the middle of the trading range or below is possible. The increased market volatility suggests caution. Be careful.
The decline in the 10-year treasury yield has provided a bit of a buffer for the stock market so far this year. Should interest rates turn up with a market that is trying to find its footing, we could see increased selling. At this point, the declining yields do not reflect a flight to safety but rather just the normal ebb and flow of interest rates.
Our Point
The market was marching upward before Walmart (WMT) surprised on Thursday with a cautious outlook in its earnings report. While the retail giant recorded increased revenues and profits and exceeded market estimates, their forward-looking guidance was below market expectations. The sobering outlook led to a nearly 7% sell-off in the stock. As a significant holding of both the Dow and S&P, the decline took both indices down on Thursday. The red on the screen led to broad based selling across the board. To this point today, the market is again struggling to find buyers as United Health Care (UNH) (another significant holding of both the Dow and S&P 500) fell 12% at the market open on news that the DOJ is opening a fraud investigation on its Medicare billing practices. The news from these two behemoth companies has given investors a reason to sell. However, as mentioned above, the selling has been orderly and, while unpleasant, hasn’t yet changed much in the way of the market trends. The major indices are all within a strong day or two of their highs. We will likely get a resolution to the upside or downside next week as the much-anticipated earnings from AI-focused chipmaker Nvidia (NVDA) are released Wednesday after market close. With the Deep Seek news of a few weeks ago, investors will be eager to see how the company projects its upcoming quarters. We will also get another inflation reading with the PCE report due out Friday morning. Finally, the parliament elections in Germany could create volatility in the European markets and by extension global market sentiment. With the markets in the mood to sell, perceived bad news could have an outsized effect on market movements. We continue to believe that weakness should be bought with any excess cash. We have done a little of that this week as we sold a couple of lagging positions and have purchased a couple of new positions on weakness. Our stops are in place, and we will not be hesitant to reduce portfolio risk should things continue to weaken. Active tactical management cannot avoid all losses, but it can avoid life changing ones. We continue to watch things closely. Investors should not get complacent in this market. While buying positions is easy, selling is the other half of successful investing that is all too often overlooked. My fingers are crossed that this recent bout of frigid weather is the last of Old Man Winter and we can head into spring! Bundle up and enjoy your weekend wherever it finds you.
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Bills Asset Management (“BAM”), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from BAM. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. BAM is neither a law firm, nor a certified public accounting firm, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of BAM’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at www.billsasset.com.
Please Note: If you are a BAM client, please remember to contact BAM, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. BAM shall continue to rely on the accuracy of information that you have provided.
Please Note: IF you are a BAM client, Please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.
About Bo Bills
Founder and Chief Investment Officer at Bills Asset Management. With over 30 years of experience in managed risk investing, Bo has helped countless clients achieve their financial goals while preserving capital.
Stay Informed
Subscribe to our newsletter for the latest market commentary and insights.