Pullback Deeper Than Expected

Stocks continue under pressure as they pullback from the huge run last month. Last week, I offered that this week would be the buying opportunity, but the pullback has been deeper than I expected. “Relentless” would be an exaggeration, but there has certainly been some strong selling. While Friday’s action did show the major indices mostly down 1%+, the selling was less severe than Thursday.

Going in to next week, volatility should continue to be on the high side and I do not believe the bottom is in just yet. The market has the look and feel of wanting one or two more down days next week, but the odds do favor a reversal and rally by the end of next week.

Sector selling was downright ugly, but it was not across the board. In fact, materials, industrials, energy and biotech bucked the strong downdraft to close the week. The first three of those sectors, according to the pundits, should be hit even harder with a strong dollar, but that was not the case. It usually pays to confirm what you hear as absolute from the talking heads.

High yield bonds continued their decline and it looks like they are headed back to their 2015 lows in short order. This sector has been very frustrating to trade for the past 18 months and I would almost say that it’s been more difficult now than at any time over the past 20 years. For full disclosure, I run two high yield bond strategies that have been challenging so I may be a little close to the trees.

Have a great weekend! I am so looking forward to being local with my family!!

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Paul Schatz, President, Heritage Capital
Paul Schatz, President, Heritage Capital
If you have at least $250,000 of investable assets and would like to schedule a complimentary meeting, call, or video conference with me, please click on my calendar here email me at Paul@investfortomorrow.com or call the office directly at 203.389.3553.

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