This presentation reviews the financial markets throughout 2023, trends, domestic equity markets, banks, International & Emerging markets, U.S. Dollar, and much more. Financial advisors are encouraged to watch this presentation replay for a comprehensive understanding of the market trends and indicators.

Interest rates, energy prices, and the U.S. Dollar moved lower last week following softer macro data, dovish remarks from Chairman Powell, and a less hawkish Bank of Japan policy tweak. When combined with outsized CTA short positioning, a squeeze occurred. This produced an impressive topside move by all domestic equity market proxies. This now begs the question, “What’s next?”

The Catastrophic Stop model declined from last month and it now recommends raising cash. Entering November, the non-U.S. equity Core model overweighted Australia, Japan, and France, while underweighting the U.K., China, and Canada. The Explore model favored Brazil, India, Israel, Turkey, and Taiwan.

Entering November, the fixed income allocation strategy continued to favor mixed leadership. The model is overweight U.S. Long-Term Treasurys, International Investment Grade, and U.S. Treasury Inflation-Protected Securities. The model is underweight U.S. Floating Rate Notes, U.S. Investment Grade Corporate, and U.S. Mortgage-Backed Securities.

Entering November, the sector model remained with a mix of cyclical and defensive leadership. The sector model is overweight Communication Services, Utilities, Materials, and Industrials. Information Technology dropped to market weight, while Energy and Real Estate improved to market weight. Health Care and Financials joined Consumer Discretionary and Consumer Staples at underweight.

The DH Smart Value Portfolio continues to invest in companies producing excess returns through positive economic profitability, supported by solid balance sheets (quality), significant cash generation (profitability), and trading with considerable margins of safety (valuation). We believe these factors will continue to provide rational opportunities for the foreseeable future.

What you see is largely a function of where you sit. And when it comes to 2023, you are either espousing “peace on earth, good will to all” or you are thinking about how 2023 has offered up many “tricks” with only a few, very select “treats.”

Considering the plethora of forces moving markets (CTA positioning, bristling geopolitics, mutual fund year-end and individuals’ tax-loss selling, dysfunctional domestic politics, QT, sentiment extremes, EPS expectations, slowing/accelerating economy or both, etc.), it’s concerning that Wall Street continues to espouse specific levels of importance for equities and interest rates. Rarely are things on Wall Street as simple as they seem.

The stocks holding up the major domestic equity market indexes (Magnificent 7, Elite 8, Big 9) have yet to break down below their late September-early October lows. But away from this complex, plenty of selling has been occurring underneath the surface. I recommend following the NYSE Fang Plus Index as a guidepost.

My wife calls me the “Question Man” because I am usually peppering her with questions about “things and stuff” which are probably insignificant to her. To me, not so much.

The NDR Catastrophic Stop Sell model combines time-tested, objective indicators designed to identify high risk periods for the equity market. The model deteriorated from last month but entered October with a fully invested equity allocation recommendation.

The risk management model seeks to reduce exposure to fixed income sectors most sensitive to equity drawdowns. The risk management model deteriorated from last month but entered October recommending full model exposure to areas most sensitive to equity markets: U.S. High Yield, Emerging Markets, U.S. Investment Grade, and Floating Rate Notes.

The NDR Catastrophic Stop Sell model combines time-tested, objective indicators designed to identify high-risk periods for the equity market. The model deteriorated from last month but entered October with a fully invested equity allocation recommendation.

The DH Smart Value Portfolio continues to invest in companies producing excess returns through positive economic profitability, supported by solid balance sheets (quality), significant cash generation (profitability), and trading with considerable margins of safety (valuation). We believe these factors will continue to provide rational opportunities for the foreseeable future.

“October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February."

Given the S&P 500’s bearish reversal in late July, early August downside follow-through, & poor seasonal factors, the challenges faced by equity markets have consistently built up. This includes deteriorating price-related guideposts (breadth, new lows, selling volume over buying volume, trend, risk-off sectors outperforming, etc.), plus a more hawkish Fed.

“A growing expectation that the Fed will keep interest rates higher for longer threatens to stifle the tech-stock rally, potentially dimming the outlook for indexes heavily influenced by the sector.” ~Wall Street Journal, emphasis mine.

This presentation explores tailwinds and headwinds, domestic price trends, sentiment, seasonality, crude oil, interest rates, U.S. dollar strength, and much more. Financial advisors are encouraged to watch this presentation replay for a comprehensive understanding of the market trends and indicators.

Year-to-date, through the end of August, the portfolio was up +6.88%* net of fees vs. the benchmark Russell 1000 Value Index Total Return, +5.79%. For the three-year period from 8-31-2020 through 8-31-2023, the portfolio gained at a +13.38%* annualized rate (net of fees) vs. +11.39% for our benchmark.

Entering September, the fixed income allocation strategy remains with a risk-on message and suggests no rebalancing from the month prior. The model remains overweight U.S. Treasurys, U.S. High-Yield Bonds, U.S. Investment Grade Corporate, U.S. Mortgage-Backed Securities, Emerging Market Bonds, and underweight U.S. Treasury Inflation-Protected Securities, and Floating Rate Notes.