After bottoming with a decline of 6.1%, on an intra-day basis, the S&P 500 (SPX) not only put in its first winning week of the year but is in the plus column for February. The CBOE Volatility Index (VIX), what I refer to as the “sucker” index crashed nearly 29% from its recent spike, indicating that speculators and traders were betting on an extended correction but investors were not heading for the hills. Investors won traders lost.
Asset Allocation Coming Back to Stocks
Friday’s labor report was met with a round of applause from market participants. I do not think that it was because of job creation but because the data suggested that the Federal Reserve Open Market Committee (or FOMC) might think twice before taking any more action to reduce its quantitative easing (or QE) program.
In January 2014, for fear of a market correction, assets reversed its 2013 allocation out of bonds into stocks. That might have come to a conclusion and the allocation back into stocks may be underway once again.
While earnings season will continue this week with a multitude of companies releasing their results, for the most part the headline tech and industrial companies have already reported. This week’s earnings calendar will feature mostly restaurants, beverage and food companies.
Taking Advantage of the Market Bottom with Harley-Davidson
Perceiving that a market bottom was forming last week, I moved our managed accounts at Lake View Asset Management, LLC and my personal accounts into a fully invested state, which is where we stood by the end of the week. The stock which we got the most aggressive with during the pullback was Harley-Davidson (HOG) which we accumulated just below $62 and closed at a few pennies below $65 on Friday. I would add that Harley-Davidson will go ex-dividend this week for $0.275 per share.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long HOG — although positions can change at any time.
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