Market Update: Defying Logic!

October turned out to be some of the best single month increases EVER for the Dow Jones and S&P 500, each up 9.6% and 10.77% respectively.  The old phrase "the markets can climb a wall of worry" certainly held true as Europe continues its attempt to avoid financial collapse, Amazon and Apple missed earnings and consumer sentiment remains bearish.  As we know through studying market history, cyclical bear markets can serve up plenty of volatility along with strong bear market rallies creating the illusion that things are getting better.  At Volt, we examine the longer-term and shorter-term trends within the markets to understand current risk.  At this point we continue to believe we are in the midst of the Secular Bear Market that began in 2000 and as of October 4th, when the S&P 500 crossed through -22% off its most recent high, entered into a Cyclical Bear Market (shorter term within the grander trend).  With that said, markets don't go straight up or down and it appears that continued volatility will be par for the course as we await to see if this is a bottoming phase or a set-up for the final decent before finding a bottom.  In times like this our investment discipline dictates that we take a defensive stance within our equity portfolios to protect capital.  On the contrary, our Absolute Return Strategy is focused on taking advantage of the market volatility this environment produces to capture return during flat and downward trends.  We understand that it is possible that the "October Rally" could continue further up from here but we will remain cautious as we know this is a high risk environment and believe this rally lacks the fundamental backdrop to be a sustainable one. 

The opinions are strictly those of the author(s) and are provided for informational purposes only. No investment should be made as a result of this article without your personal due diligence and research, and with the counsel of an investment professional.