Saturday, December 23, 2017 11:15 AM EDT
With the Dow Jones Industrial Average approaching 25,000, the S&P 500 touching 2,700, and the tech-heavy Nasdaq Composite topping 7,000, our quantitative strategy has once again harvested considerable quarterly gains.
The US stock market is likely to have its second-best year since the financial crisis. While the Dow has touched a new all-time high one out of every four days this year, the Nasdaq is up almost 30% year to date. One $64-million-dollar question that every investor wonders about is, will the bull market continue next year?
Since the presidential election last year, over half of the S&P 500’s sectors contributed to this one-year rally, with the Information Technology sector leading the way, miles ahead of others. Broadly speaking, 2017 can be seen as a marketwide rally. Among all the large-cap sectors, there is one particular phenomenon that is boosting investor confidence: sector rotation. Dissecting 2017 into short segments, we observe that different sectors tend to lead the market at different times. Especially, two of the heavyweights, Financials and Technology, have alternated frequently this year, with joint force from Health Care and Consumer Discretionary. This pattern is typically deemed a healthy sign of broad market participation, particularly in a bull market like 2017’s. It also marks a crucial difference between the current bull market run and the 1999 tech-bubble: Two decades ago, the market was led mainly by one sector.
Another major characteristic of this bull run is that volatility has remained significantly low. Twelve months ago, the VIX’s sustaining below a 10 handle was not on anyone’s forecast list for 2017. One of the main reasons explaining a low-VIX environment is that 2017 hasn’t seen any major pullback: 3% is as much as the stock market has retreated in the past twelve months. However, while many may view VIX as a bargain at this time, we would like to remind investors that VIX is cheap only if it poised to rebound soon, as trading VIX exposes investors to significant risk.
So will the bull market continue into 2018? We will have to wait to find out in our 4Q2018 quarterly review. However, just as our quant model constantly monitors the market, we should always watch closely the important factors underlying a bull market.
Disclaimer: The preceding was provided by Cumberland Advisors, Home Office: One Sarasota Tower, 2 N. Tamiami Trail, Suite 303, Sarasota, FL 34236; New Jersey Office: 614 Landis Ave, Vineland, NJ ...
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Disclaimer: The preceding was provided by Cumberland Advisors, Home Office: One Sarasota Tower, 2 N. Tamiami Trail, Suite 303, Sarasota, FL 34236; New Jersey Office: 614 Landis Ave, Vineland, NJ 08360. 1-800-257-7013. This report has been derived from information considered reliable, but it cannot be guaranteed as to accuracy or completeness. For a list of all equity sales/purchases for the past year, please contact Therese Pantalione at 1-800-257-7013, ext. 315. This report is currently about 1700 pages in length. It is not our intention to state or imply in any manner that past results and profitability are an indication of future performance. This does not constitute an offer to sell or the solicitation or recommendation of an offer to buy or sell any securities directly or indirectly herein. Cumberland Advisors supervises over $2.4 billion in separate account assets for individuals, institutions, retirement plans, government entities, and cash-management portfolios. Cumberland manages portfolios for clients in 48 states, the District of Columbia and in countries outside the U.S. Cumberland Advisors is an SEC registered investment adviser. For further information about Cumberland Advisors, please visit our website at www.cumber.com. Please feel free to forward this Commentary (with proper attribution) to others who may be interested. CONFIDENTIAL: This e-mail, including its contents and attachments, if any, are confidential. If you are not the named recipient please notify the sender and immediately delete it. Copyright and any other intellectual property rights in its contents are the sole property of Cumberland Advisors. E-mail transmission cannot be guaranteed to be secure or error-free. The sender therefore does not accept liability for any errors or omissions in the contents of this message which arise as a result of e-mail transmission. If verification is required please request a hard-copy version. It is important that you do not forward full account numbers, tax identification numbers or confidential personal information via email unless it is password protected Although we routinely screen for viruses, addressees should check this e-mail and any attachments for viruses. We make no representation or warranty as to the absence of viruses in this e-mail or any attachments. Please note that to ensure regulatory compliance and for the protection of our customers and business, your e-mail message is not private in that it is subject to review by the firm, its officers, agents, employees, and by federal or state regulatory authorities including but not limited to the Securities and Exchange Commission.
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