Past performance is no guarantee of future results. Trend signals are proprietary research of Fortunatus Investments, LLC, a Registered Investment Advisor with the Securities and Exchange Commission (SEC). Reference to registration does not imply any particular level of qualification or skill. Prior to June 2014, Fortunatus Investments was a wholly owned subsidiary of Executive Wealth Management, LLC and they continue to share common ownership and control. Data source for returns is FactSet Research Systems Inc. This chart is not intended to provide investment advice and should not be considered as a recommendation. One cannot invest directly in an index. Executive Wealth Management does not guarantee the accuracy of this data.
Quote of the Week
This whole idea of being your own bank — let me put it this way, ‘Do you make your own shoes?’ The reason we have banks is that we don’t want to deal with all those things that banks do.
Computer programmer Stefan Thomas questioning in The New York Times last week one of the most cited benefits of cryptocurrencies, autonomous asset management, after he lost the password that allowed him to gain access to the 7,000 Bitcoins (approximately worth $250 million) he had stored on a computer hard drive in 2012.
Market News
We saw a bit of a shock last week when retail numbers from December came out shy of market consensus by almost 1% at -1.95% month over month. While the downward trend may be not what we like to see, when we look at it from a perspective of the previous economic cycle we are still making good progress. From the cycle high in the Great Recession (from 2007 to 2009), it took 41 months for retail sales to go from peak to peak (see the chart below). We would not be surprised by another difficult retail showing for January as the lockdowns are still in force throughout much of the country. However, this trend will most likely abate and steady itself as the vaccine rolls out and the weather warms. We will also see if any new stimulus will be forthcoming as Congress reconvenes this week.
We saw people move into a new sense of normal last summer and spending was up overall, albeit in a much different pattern than before. Some surprises came in the form of where people spent their money. For instance, according to business software service provider Womply, the average increase in spending at pet stores across the nation was +21% in 2020. While this seems excessive, we can look back now and infer that when people spend more time with their pets due to lockdowns, spending on pets should increase. Though we are not sure that this was sussed out by many people beforehand or if another lockdown would produce the same spending patterns.
Not all of the data coming out in the near future will be good, as was evidenced by the jobs reports that came in on Thursday showing an unexpected increase of 165,000 new jobless claims above expectations, for a total of 965,000 new claims of unemployment. While this is a difficult number to swallow, we have to remember that we are still at highly elevated unemployment coupled with lockdowns across much of the nation. It is not unreasonable to assume that unemployment claims will continue to be high. We don’t want to see the number breakout back above 1 million per week, but data like this helps us remember that we are still in the middle of a crisis. The good news is that we are miles away from the weeks of 3 million filers for unemployment in March 2020.
Model Update
During the week ending on January 16, 2021, all three of the Fortunatus Equity models rebalanced their underlying holdings. The Equity Dividend and the Equity Growth models both added a new position in the construction industry. The Emerging Growth Companies model made two new additions in the healthcare sector.
All remaining Fortunatus models were unchanged during the week. The major equity market sectors maintain a long-term favorable trend, and the Asset Allocation models continue to overweight domestic stocks in relation to international equities.
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Returns are calculated as indicated below with reinvested dividends not considered except for the Barclays U.S. Aggregate Bond Index. Data source for returns is FactSet Research Systems Inc. The London Gold PM Fix Price is used to calculate returns for gold
1 Week = closing price on January 8, 2021 to closing price on January 15, 2021
1 Month = closing price on December 15, 2020 to closing price on January 15, 2021
3 Month = closing price on October 15, 2020 to closing price on January 15, 2021
YTD = closing price on December 31, 2020 to closing price on January 15, 2021
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