Market Compass Through Extreme Volatility

April 14, 2020

The HCM BuyLine® went positive over the weekend, and we are re-adjusting our portfolio to start moving back into equities. We will be moving back in at a measured pace. I know some of you will be saying this could be a run up and then another fall, but we are very aware of the volatility that will be ahead of us. On a short-term basis, we are overbought and a pullback is a high probability, but we feel strongly that the bottom was set in the 2200-2300 area on the S&P 500 in March. The volatility is going to be at an extreme for some time, but the math has indicated the trend has changed.

Now, let’s look at the odds:

When a new HCM BuyLine® signal has occurred, there is a 73% chance it will hold and move higher. There is also a 27% chance it will not hold, and we will be forced to reduce exposure again. 


Will earnings be bad? Of course, nobody expects them to be anything but bad, but this information is already priced into stocks. Savvy investors are not looking at earnings, they’re looking to see if the company can stay alive. If they can, the odds are very good they will be back on track by the end of the year, and this is our firm belief.

We have been reading that this will change the economy, investor sentiment, and how we interact with each other forever. We do not believe that at all. Our experience has been that people have very short memories. If anything, it is going to open people’s views that yes, we do not live forever and if you’re not having fun and living it up to some degree, you better get started.

Let’s look back in history at what happened the last time we had a massive pandemic, which was the 1918 influenza, (and on a side note it was 100 time worse than what we are experiencing with COVID-19), what came out of it? Well let me tell you - the roaring 20s had one of the most dramatic run ups in stock market history. When people feel like this is it, they start looking at things in a whole new light.

Our prediction for 2020 is we will see extreme volatility for the next few months, but we feel the market could set a new all time high by year-end. If not by year-end, then by the first quarter of 2021.

The HCM BuyLine® will be our compass and the odds are high it will point us in the right direction. 

We understand volatile markets can be unsettling. Download our new Volatile Market Guide.

Wealth Watch

Sign up for our weekly news to hear from CEO and portfolio manager, Vance Howard.