Markets Shift from “Growth at any Price” to “Strategic Resilence”

The stocks that has worked the most for the past several years, Mega-Cap Tech, has suffered the most so far this year. This market correction is a good reminder you need an investment strategy designed for all market conditions.

Macro Indicators in March

U.S Stocks
$SPY -4.94% MTD

U.S Treasury
10 Year Yield 4.31% +9.29% MTD

Volatility
VIX 25.92 +20.71% MTD

Top Performing Sectors

• Energy
• Utilities
• Financials

Energy is unsurprisingly the top performing asset of the month with the geopolitical tension surrounding the Strait of Hormuz.

Utilities is also not too surprising with the rising volatility. Utilities is a very defensive sector. It tends to do well in declining economic conditions.

The Financial sector was the benefactor of what we refer to as a “relief rally”. Once stocks have taken a beating and their prices have fallen considerably you will see some money flow into them to scoop them at a slight discount.

Bottom Performing Sectors

• Industrials
• Staples
• Healthcare

Industrials is highly cyclical and benefit from cheap access to capital. This month saw expectations of rate cuts fall significantly weighing on the sector.

Staples, while generally defensive, is subject to input cost inflation dragging down profit margins. Food prices are highly correlated with energy prices. With the average consumer already stretched thin at the super market these companies may lack pricing power.

Healthcare has faced considerable regulatory uncertainty under this current administration. In addition specific industries inside the sector, like biotechnology, are highly cyclical and tend to perform poorly in faltering market conditions.

Long Term Outlook

Until a very clear and actionable plan with a realistic timeline is established for the situation in the middle east I am likely to remain “pessimistically sideways” on markets, especially U.S Markets. What that means is I believe the majority of damage has been done in the markets, but I don’t see many potential positive catalysts. Not to say we are out of equities completely, rather we are overweight bonds and under-valued stocks

Do you have questions about your portfolio regarding the recent conflict? Book some time to talk here.

This information is provided for educational purposes only. Nothing here should be considered as a recommendation. Before you make any investment decision please do your own research or schedule some time to speak with us about your specific situation. All investing involves risk including the risk of loss. JFJ Advisory Services cannot guarantee the outcome of any investment plan