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The Market Bottomed In October. Now What?



The market bottomed last October despite ongoing concerns about inflation, higher rates, recessionary risks, and a banking crisis. While the media headlines and youtube podcasts are filled with “crisis” headlines, as noted in “Analysts Raise Estimates,” expectations for growth and earnings are rising.

“If there is ‘no recession in 2023,’ then such would suggest the decline in corporate earnings and profit margins is complete. Therefore, such would suggest that equities are fairly valued at current levels supporting the return of a more bullish trend. Currently, the Bloomberg Economic Growth Consensus for the U.S. economy is rising, with only one-quarter of negative growth expected.”

Market Bottomed, The Market Bottomed In October. Now What?

“Given that earnings are derived from economic activity, then the current decline in earnings should bottom before the trough in economic activity. Interestingly, in mid-March, S&P Global released its earnings forecast for the S&P 500 through the end of 2024. As with economic analysts, S&P sees earnings bottoming in the first quarter and returning to its January 2022 peak.”

Market Bottomed, The Market Bottomed In October. Now What?Market Bottomed, The Market Bottomed In October. Now What?

“Interestingly, the financial markets have factored in these improving outlooks since the October lows. Such is unsurprising as investors begin to pay up for investments based on more robust forecasts. Therefore, if the earnings forecasts are correct, the market should reflect those forecasts and rise toward the previous market peak.”

Market Bottomed, The Market Bottomed In October. Now What?Market Bottomed, The Market Bottomed In October. Now What?

While economists and analysts are basing their views on the premise of a “no recession” scenario, the market bottomed in October on hopes of a reversal of monetary tightening by the Federal Reserve.

It is currently unclear if either view is correct.

Nonetheless, as investors, several technical indicators support the notion that the market bottomed in 2022, suggesting an alternative view of an ongoing bear market.


Still In A Correction

While there have been many discussions about the “bear market” last year, such is not the case. Yes, the market was down more than 20% last year, which is the media’s definition of a bear market. However, is an arbitrary 20% decline still a valid measure?

To answer the question of validity, let’s agree on a basic definition.

  • A bull market is when the market price trends higher over a long-term period.
  • A bear market is when the previous positive trend ends, and prices trend lower.

The chart below provides a visual of the distinction. When looking at price “trends,” the difference becomes apparent and valuable.

Market Bottomed, The Market Bottomed In October. Now What?Market Bottomed, The Market Bottomed In October. Now What?

The distinction is also essential to understanding the difference between “corrections” and “bear markets.”

  • “Corrections” generally occur over short time frames, do not break the prevailing price trends, and are resolved by markets reversing to new highs.
  • “Bear Markets” tend to be long-term affairs where prices grind sideways or lower over several months to two years as valuations “mean revert.”

A good example of the inaccuracy of the 20% rule was the 35% price decline in March 2020. That decline was unusually swift using monthly closing data. However, that decline did not break the long-term bullish trend and quickly reversed to new highs, suggesting it was a “correction.”

The massive fiscal impulse into the financial system and the economy in 2020-2021 led to an unprecedented deviation above the bullish trend. The market is in the process of correcting that excessive deviation but has yet to retest the previous bullish trend. Given such a large deviation, that correction process will require a deeper price decline or a long period of price consolidation.

Regardless of how the price deviation is resolved during the correction process, the secular bull market that started in 2009 remains intact as long as the rising price trends continue.

The long-term technical structures of the market also confirm this view.

Long-Term Technicals Remain Bullish

Daily price charts can provide a short-term view of market psychology from days to weeks. The problem with daily price analysis is volatility can cause short-term swings in the market that can disconnect from the market’s underlying trend or fundamental data.

The volatility gets smoothed out if we slow that price action by examining weekly pricing data. Such reveals a clearer picture of the market delivering a more bullish message.

The S&P 500 scored seven weekly closes above its 40-week moving average and then successfully retested that breakout level. Such suggests the return of a more bullish trend. Assuming supports continue to hold, the next major resistance levels are the February highs of 4200, then the August 2022 peak at 4325.

Market Bottomed, The Market Bottomed In October. Now What?Market Bottomed, The Market Bottomed In October. Now What?

Notably, the October lows held critical support at the 200-week moving average, which remains support for the market since the 2009 lows.

Market Bottomed, The Market Bottomed In October. Now What?Market Bottomed, The Market Bottomed In October. Now What?

Furthermore, the vast majority of the major markets and sectors have registered weekly buy signals. Such has historically denoted a more bullish bias to the overall market for the next 12 months.

Market Bottomed, The Market Bottomed In October. Now What?Market Bottomed, The Market Bottomed In October. Now What?

The chart below shows the moving average crossover signal back to 1998. The orange bars are periods where equity exposure should be reduced. As you will note, the periods of a positive cross, where equity exposure should be increased, usually last for a year or more. Since 1998, there were only two false signals to increase equity exposure in 2002 and early 2016.

Market Bottomed, The Market Bottomed In October. Now What?Market Bottomed, The Market Bottomed In October. Now What?

From an investment viewpoint, the technical action of the market suggests that the market bottomed in 2022. However, much like we saw in 2002, there is a risk that one more leg lower is possible.

Navigating What Comes Next

As noted, investors’ biggest problem is discerning between market action and the economic and fundamental dynamics.

Let me be very clear…I have no idea if the market bottomed in October or not.

However, there are some rules we can follow.

Rule #1: Cut Losers Short & Let Winners Run.

It takes tremendous humility to navigate markets successfully. There can be no such thing as hubris when investments do not go how you want them. Investors plagued with big egos cannot admit mistakes, or they believe they’re the most significant stock pickers who ever lived. To survive in markets, one must avoid overconfidence.

Rule #2: Investing Without Specific End Goals Is A Big Mistake.

Before investing, you should already know the answer to the following two questions:

  1. At what price will I sell or take profits, if I’m correct?
  2. Where will I sell it if I am wrong?

Hope and greed are not investment processes.

Rule #3: Emotional & Cognitive Biases Are Not Part Of The Process.

If your investment  (and financial) decisions start with:

  • I feel that
  • My friend told me
  • I heard
  • I hope

You are setting yourself up for a bad experience.

Rule #4: Follow The Trend.

“80% of portfolio performance is determined by the underlying trend. “

Rule #5: Don’t Turn A Profit Into A Loss.

Investing is about creating returns over time. If you don’t harvest gains and allow them to turn into a loss, you have started a “financial rinse cycle.”

Most importantly, “getting back to even” is not an investment strategy.

Rule #6: Odds Of Success Improve Greatly When Technical Analysis Supports Fundamental Analysis.

The market, for a long-time, can ignore fundamentalsAs John Maynard Keynes once said:

“The stock market can remain irrational longer than you can remain solvent. “

Applying a technical overly to determine the “when” to invest can significantly improve the return and control the capital risk of the “what” fundamental analysis uncovers.

Rule #7: In Bull Markets, You Should Be “Long.” In Bear Markets – “Neutral” Or “Short.”

Investing against the market’s major “trend” is generally a fruitless and frustrating effort. During secular bull markets – remain invested in risk assets like stocks or initiate an ongoing process of trimming winners.

During bear markets, investors can reduce risk asset holdings to their target asset allocations and build cash. An attempt to buy dips believing you’ve discovered the bottom or “stocks can’t go any lower” generally doesn’t work out well.

Rule #8: Invest First With Risk In Mind, Not Returns.

Investors focusing on risk first are less likely to fall prey to greed. We tend to focus on the potential return on investment and treat the risk taken to achieve it as an afterthought.

Responsible portfolio management aims to grow money over the long term to reach specific financial milestones and consider the risk taken to achieve those goals. Managing to prevent significant drawdowns in portfolios means giving up SOME upside to prevent the capture of MOST of the downside. While portfolios may return to even after a catastrophic loss, the precious TIME lost while “getting back to even” can never be regained.

Rule #9: The Goal Of Portfolio Management Is A 70% Success Rate.

Think about it – Major League batters go to the “Hall Of Fame” with a 40% success rate at the plate.

Portfolio management is not about ALWAYS being right. It is about consistently getting “on base” that wins the long game. There isn’t a strategy, discipline, or style that will work 100% of the time.

Once you understand that, the other 8-rules above become much simpler to incorporate,

As an investor, stepping away from your “emotions” momentarily is most important. Look objectively at the market around you. Is it currently dominated by “greed” or “fear?” Your long-term returns will depend much on how you answer that question and manage the inherent risk.

“The investor’s chief problem – and even his worst enemy – is likely to be himself.” – Benjamin Graham



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The family office for Mark Zuckerberg and Jack Dorsey backs French rival to Microsoft Excel – CNBC




In this article

The logo of the spreadsheet software Microsoft Excel is shown on the display of a smartphone.
Thomas Trutschel | Photothek | Getty Images

French business planning software startup Pigment has raised $88 million in a funding round led by ICONIQ, the private investment fund that manages the money of tech billionaires such as Mark Zuckerberg and Jack Dorsey.

Pigment is best known for its business planning and forecasting platform that’s designed to be more user-friendly than Microsoft’s spreadsheet software Excel.


The company, co-founded and helmed by dual CEOs Eleonore Crespo and Romain Niccoli, told CNBC it planned to use the funding to expand its reach in the U.S. and artificial intelligence.

Venture capital firms Felix Capital, Meritech, IVP, and FirstMark also participated in the funding round.

Pigment counts the likes of Klarna, Miro and Tommy Hilfiger owner PVH as its customers.

The company’s tools are mainly used by finance teams to plan and make financial and business decisions. As well as Microsoft, Pigment also views enterprise software tools from giants like Google, SAP and Oracle as rivals.

Crespo said that, in 2022, Pigment grew its revenues by 600% and its total user base increased tenfold — and insisted it was well positioned to compete with behemoth incumbent Microsoft.

“We not only have users in the finance team but outside of finance, and that’s super interesting for investors to hear that we are not a finance platform but a business database that can serve any business leader out there from HR to sales to marketing, to R&D [research and development],” she said.

“We are here to sell [to] any business leader. And not only that, but they have heard from their portfolio companies that we managed to serve the most forward-looking companies out there.”

Pigment also plans to use the latest influx of money to invest in the development of AI products.

It introduced a new service called Pigment AI last month, on the heels of heightened buzz surrounding AI and products like ChatGPT, which lets clients query data, identify patterns and automate analysis and reporting.

Crespo said there are no plans to increase headcount substantially and Pigment was instead looking to grow in a more sustainable way, given the pressure from investors on businesses to achieve profitability in favor of breakneck growth.

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Saudi Arabia’s Public Investment Fund just reshaped pro golf. It’s not stopping there



Saudi Arabia’s mountain of cash has upended the world of professional golf. But that is only a small sliver of the money it is sinking into a number of prominent businesses elsewhere around the globe as the kingdom moves to diversify away from a dependence on oil income – and as the petro-kingdom tries to achieve its political goals.

The Saudi Public Investment Fund is a government-controlled fund that has $650 billion in assets under management, according to its most recent filing. It is aiming to top $1 trillion within a few years. A state-owned investment fund like the PIF is not unique. It is ranked only the seventh-largest in the world, according to the Sovereign Wealth Fund Institute.

While some of those are pension funds for a country’s citizens or public employees, others, like the PIF, operate the way a private sector investment firm might, trying to make money through a diversified portfolio of investments.

But what makes Saudi Arabia’s fund different from those private investment firms is that since the country faces widespread condemnation for its human rights record, its investments in sports and other entertainment companies can be seen as an attempt to polish that tarnished reputation.


The PIF’s creation of LIV Golf a year ago, reportedly at a cost of $2 billion, attracted many of the sport’s top players away from the US-based PGA Tour and Europe-based DP World Tour by offering big dollar prize money. It led to a year-long legal battle that banned LIV golfers from the established tours and brought some unwanted attention to Saudi’s human rights record. Critics of LIV Golf accused the Saudis of backing the new tour as a form of “sportswashing” its reputation.

But the legal battles, acrimony and competition for the best golfers between LIV and the PGA and DP World Tour suddenly ended Tuesday with the announcement that the three would form a combined for-profit company. The PIF plans to make undisclosed additional investments into the entity.

Soccer, video games and other investments

The chairman of the new golf series will be the chairman of state-owned petroleum company Saudi Aramco, Yasir Al-Rumayyan, who also controls English soccer team Newcastle United and is himself a governor of the PIF.

The Saudis have also been throwing big dollars at some of the world’s best known soccer players, wooing legends such as Cristiano Ronaldo and Karim Benzema to play in Saudi Pro League.

The investment in sports is not a vanity play, according to Al-Rumayyan.

“It all makes financial sense to us. We don’t like to subsidize things,” he said on an interview on CNBC Tuesday announcing the deal with the PGA.

But whether the Saudis’ investments are driven by a desire for profits or good publicity, what’s clear is that pro sports are not the only place where the Saudis are flexing their financial might.

For example, it has a total of $7.5 billion in investments in several leading video game companies, according to its most recent filing, giving it a 9% stake in Electronic Arts

, a 7% stake in Take-Two Interactive and nearly a 5% stake in Activision Blizzard

. It also owns more than 5% of Live Nation

, the concert promoter and owner of Ticketmaster, and significant stakes worth hundreds of millions each in cruiser operator Carnival Corp

., Uber

and Zoom


Its biggest US investment is in upstart electric vehicle maker Lucid

. The PIF owns 60% of Lucid

’s stock, worth $7.6 billion as of Tuesday’s close. Lucid

recently announced the PIF would invest another $1.8 billion in the company to help fund its operations.

In 2018 when Elon Musk was thinking about taking Tesla

private, he sought funding from the PIF, which already had a stake in Tesla

at that time. It no longer lists Tesla

as one of its holdings. But last year it helped Musk with his $44 billion purchase of Twitter by agreeing to roll over its existing $1.9 billion investment in the social media platform to the new Musk-controlled company.

LIV Golf and PGA Tour merger: here’s everything you need to know


Not all of the PIF investments have been publicly disclosed. For example it’s not clear exactly how much it invested to start up LIV Golf. And the Washington Post has reported that it invested $2 billion into a private equity firm created by Jared Kushner, Donald Trump’s son-in-law, soon after Kushner left his position in the White House in January of 2021. CNN has not been able to confirm that report, but what is known is that LIV Golf tournaments have been held on Trump Organization properties.

Saudi Arabia and human rights criticisms

Many of these investments, including the creation of LIV Golf, have sparked controversy.

The PIF is chaired by Mohammed bin Salman, the Crown Prince of Saudi Arabia. Bin Salman is the man a US intelligence report names as responsible for approving the operation that led to the 2018 murder of journalist Jamal Khashoggi. Bin Salman has denied involvement in Khashoggi’s killing.

In addition, the US State Department says the Kingdom’s dismal human rights record includes free speech restrictions, torture, political prisoners and enforced disappearances.

And families of some of the victims of the Sept. 11 terrorist attack decried the news of the LIV-PGA agreement Tuesday. Some have accused the Saudi government of complicity with those attacks. Fifteen of the 19 al Qaeda terrorists who hijacked four planes were Saudi nationals, but the Saudi government has denied any involvement in the attacks. The 9/11 Commission established by Congress said in 2004 that it had found “no evidence that the Saudi government as an institution or senior Saudi officials individually funded” al Qaeda.

– CNN’s Coy Wire, Jack Bantock and Steve Almasy contributed to this report



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Investors turn to a variety of investment products in search of higher yield and income



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One portfolio manager sees a resurgence in short-term bonds occurring this year.iStockPhoto / Getty Images

Sign up for the Globe Advisor weekly newsletter for professional financial advisors on our newsletter sign-up page. Get exclusive investment industry news and insights, the week’s top headlines, and what you and your clients need to know.

In a period of market volatility, higher interest rates and inflation, more high-net-worth investors desire higher yield and income-producing products for their portfolios that go beyond the traditional stocks or bonds, according to a new report from Investor Economics.

Covered-call exchange-traded funds (ETFs) and private credit are two types of investments investors mention in particular, says Carlos Cardone, managing director of Toronto-based Investor Economics, an ISS Market Intelligence business.

Covered-call strategies are designed to provide exposure to a portfolio of stocks while writing covered calls against them to earn premiums, says Darcie Crowe, senior portfolio manager and senior wealth advisor with Crowe Private Wealth at Canaccord Genuity Wealth Management Canada in Vancouver. She cautions clients to look beyond the attractive yield.


Some clients don’t fully recognize the downside risks of the strategies, along with the fees involved. They also don’t understand they’re sacrificing some of the upside in exchange for income, she adds.

“We want to make sure clients are looking at it from a total return perspective,” Ms. Crowe says. “If we have a positive outlook on the underlying stocks, our preference is typically to hold them for the long term, collect the dividends and not cap the upside potential through a covered-call strategy.”

Andrew Feindel, portfolio manager and investment advisor with Richie Feindel Wealth Management at Richardson Wealth Ltd. in Toronto, says clients need to comprehend all the nuances of what they’re buying. He recently landed a few clients who had a bunch of covered calls.

“They didn’t understand why they weren’t protected when markets went down,” Mr. Feindel says. “There’s this whole idea that covered calls protect you and they don’t. If the markets go down, you’ll lose that amount. When the markets go up, you just got a higher dividend because you’re receiving those options.”

Private credit offers strong yields but also higher risk

In terms of private credit, Ms. Crowe says it has been a popular asset class for high-net-worth clients for several years, as some move away from the traditional 60/40 equity-bond portfolio to explore alternatives.

“They’re looking for products that can be included in a portfolio to generate income through a diversified return stream,” she says.

Ms. Crowe positions it for a “very unique investor profile.” For starters, the investor must be accredited to have access to these products and have a minimum amount to invest in them – typically around $25,000.

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Private credit funds provide access to a portfolio of loans, typically to private corporations in the small- to mid-cap space, Ms. Crowe explains, noting that interest rates are typically higher than traditional bank loans.

“Private credit portfolios would be considered higher risk because, usually, the loans within these portfolios are made to companies that aren’t able to access loans from the bank for a variety of reasons,” she adds.

While private credit offers strong yields, the underlying loans are illiquid and have what Ms. Crowe calls “the opposite characteristics of high-interest savings accounts, in many aspects,” which clients can access at any time. In this case, private credit redemptions are typically available on a quarterly basis, sometimes longer, and often have a minimum initial hold period of up to a year.

“It’s important for clients to know that this is a long-term investment horizon,” she says. “It needs to be used specifically in those situations in which clients have no need to draw on those funds in the immediate term.”

Mr. Feindel expects to see more of these types of funds, especially as institutions add to their private equity exposure in pension plans.

“It will become democratized in the sense that it’s not just institutions anymore but individuals purchasing,” he says.

Opportunities in private real estate, preferred shares and bonds

Another trend Ms. Crowe has seen is more investment toward private real estate portfolios. She notes that multi-family residential real estate has been a strong performer and provides attractive yields and cash flow, while also having a limited correlation to equity markets.

“Given the strong rents we have seen in Canada, they have demonstrated solid net operating income growth over the past several years,” she says.

Rate-reset preferred shares are another asset class Ms. Crowe likes due to the attractive tax-efficient yield. She says high-quality companies have preferred share dividend yields ranging from 6 to 8 per cent.

“These preferred shares will typically reset their dividend payment every five years based on a spread above a government bond with a similar term,” she says.

“Looking ahead, many of these preferred shares are going to be resetting at yields significantly higher than at their previous reset date, when government bond yields were exceptionally low.”

That creates a great opportunity for strong yield, in addition to capital gains potential as dividends reset higher, she adds.

Meanwhile, Mr. Feindel sees a resurgence in short-term bonds occurring this year.

He says the average bond lost 14 per cent last year, which he notes was “not just their worst year on record,” but the worst year by far due to rising interest rates and other factors.

Now that interest rates may stabilize, there could be an opportunity for a closer look.

“A lot of them are paying 5.8 per cent right now, yield to maturity, and then they’ll likely do well when interest rates start going down,” he adds.

Investor Economics’ Mr. Cardone also says not to count out traditional fixed-income products.

“If we can continue to see this environment where inflation has been easing, and have stable interest rates, we’re going to start to see a massive comeback to fixed income,” he says.



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