Thoughts 02.01.16

January a very tough month for stocks.  I haven't seen the official numbers for various indices but a back of the envelope calculation pits the S&P 500 down around 5%, Nasdaq down around 9% and sectors like financials down 10%.  International markets were all over the board.  Interesting is that energy seems to have been down less than the headlines would suggest.    

Markets would have been lower for January without that big rally on Friday.

We should note that while we measure markets in unites like weeks, months, years and decades, the markets themselves measure themselves in bullish and bearish cycles.  It is unclear right now to me what is happening in the intermediate and longer terms but we have been in hindsight we've been in a short term bearish cycle since the beginning of December.  Measured against that metric the S&P, to take one example, was down on a high to low basis 14%.  

I was at the Inside ETFs conference last week.  The mood at that event was the bearish I've seen it in the five years I've been going.  Consensus there was that the Federal Reserve waited too long to start raising interest rates and missed the window for doing so when they finally started.  Not too many folks that presented optimistic about the rest of 2016 for stocks either.  perhaps a contrary indicator but only time will tell.

Not much talk at the conference about the elections but my experience is that stocks have the potential for rougher sailing as we close in on the general election in the fall.  Markets hate uncertainty.  What could change that is if one of the parties nominates a mainstream candidate and the other nominates somebody from the fringes.  Gotta think a centrist Republican would love to run against Sanders and Clinton would relish a race against Cruz or Trump.  The worst thing for the market would be a fall election featuring Sanders vs. Cruz/Trump or a few others on that stage.  In that instance look for a more centrist candidate like Bloomberg or maybe even Biden to seriously consider tossing a hat into the ring.

Back in the saddle this week.  Will throw out some charts over the next few days.