What Bull Market?

Last year around the July 4th holiday I published a post titled "Time Off"  In that piece I listed several things that might bother the markets going forward.  Back then I was simply referring to the often tepid late summer/early autumn months where stocks often experience their greatest period of weakness.  Yesterday's sell-off had me go back and look at that piece and the time period around it.  Turns out that stocks rolled around for a bit and then experienced a short but nasty 9% decline into mid-October.  

But the bigger story to me is that after yesterday's sell-off we're really not that much higher than when I wrote that piece back in late June.  Here's a list of different asset classes via their ETFs from July 3rd, 2014 till yesterday.  Charts are from Stockcharts.com. As you can see, if you take out the major US indices, not much has worked besides these, REITs and longer term bonds.

One other thing I noted back then was this in regards to the events that were worrying investors.  "Of course it's likely that the thing which will finally give markets a pause and even lead to some sort of a decline isn't even registering on any body's radar.  That's the way it is sometimes."

What turned out to put the breaks on the markets in large part was the massive decline in oil prices.  I don't think anybody thought too much about that possibility back in the summer.   On balance it seems that investors are currently of the view that this is more a negative than a positive.   That is, the global implications of lower oil and a slower world economy may currently be trumping the huge benefits to consumers in saved gas costs.  Only time will tell how this is going to work out but below you can see the impact lower prices have had on the energy sector since the summer as well as the more modest returns of most everything else.

Finally there is a lot of chatter about what all of this means as the year begins.  On one hand you'll hear folks talking about the first five trading days of the year and how that weighs in on markets, but I'd retort that stocks were down the first five days of last year, suffered a late January sell off, then moved higher for the next six weeks and never were in the red on a yearly basis beyond that January period the rest of 2014.  It's just too early to judge.  I'll have more to say on this in the coming weeks.

*We are long various ETFs depicted above in client and or personal accounts.  Positions can vary in accounts depending on account strategy and the unique risk/reward characteristics of our clients.