Well, it is finally here! The moment we’ve all been waiting for!
We moved to start rebalancing portfolios on Monday, June 27th after seeing strong market activity last Thursday and Friday.
On Thursday, the S&P 500 was up .95% on 4.08 billion shares traded and then on Friday it was up another 3.06% on 6.74 billion shares traded. This was the two up days in a row that we were looking for on increasing volume.
The increasing volume indicates that more buyers are entering the market to take advantage of the depressed prices. We had strong volume on Friday, June 17th of 6.95 billion shares only to see the volume drop on Monday, June 21st to 4.12 billion shares. While these were two up days in a row, we were not convinced the buyers had entered the market in significant strength to indicate a bottoming process and reversal of trend.
Last Thursday and Friday did have these markers, so we moved to start the rebalances on Monday.
While there are no guarantees the bottom was put in on June 16th, 2022 when the S&P 500 was off 23.6% from its closing highs of January 3rd, we do know that stocks are quite a bit cheaper now than they were on January 3rd. On January 3rd we saw the forward price-to-earnings ratio (the price of a stock over its forward looking earning-per-share) at over 22x. As of June 15th this had declined to 15.6x against long term averages of 16.9x. This is well below long-term averages and represents a great buying opportunity.
Also, know that corporations are flush with cash, and when these companies’ buy-back desks are convinced the trend has shifted, we should see them entering the market in great force. This usually occurs when we see the 10-day exponential moving average cross over the 50-day exponential moving average. We have seen the trend in the 10-day shift and will be monitoring this indicator closely as it continues upwards.
As always, we thank you for the trust you have placed in us in faithfully stewarding your financial resources.
Troy and The Boulevard Team