Professionals often say that in bull markets, stocks go up on an escalator and fall in an elevator. By that we mean that stocks will rise gently and then pullbacks are sharp and swift. That is exactly what occurred last week.
Last Tuesday, I experienced the best growth performance (outside of a crisis rebound day) since founding LakeView Asset Management in 2002. I knew that something was going on and it would not follow through. Then Thursday the opposite happened. The elevator arrived. While it was comments by Anthony Fauci that pressed the lobby button, it could have been someone else all the same. Markets, especially those tech heavy, and by extension, growth, fell off their highs rather hard. It was all a matter of time. Which is why I put on some hedges several weeks prior.
After months of growth outperforming value, since the coronavirus bottom, value was finally getting its day in the spotlight. We also say in the business that trees don’t grow to the sky.
There was some follow through on Friday to the tech sell-off, but by the afternoon some buyers stepped up and a rally off the day’s lows materialized. I suspect that we could see some more downside to tech and/or more value outperformance over growth in the coming weeks, at least till the quarter draws to a close.
Strategically, I will keep my hedges on, in case there is another significant downside leg to the market. Perhaps I might trade around some hedges or positions, but absent any tremendous opportunity I will likely stand pat.
We will get back on the escalator, I just can’t say when. When we do, it will be worth the wait. Note that in May 2017, I also write about escalators and elevators. We have been on a nice escalator since then (though we caught a few elevators along the way).
This Friday, September 11 will be a solemn day as we remember those loved ones lost during the terrorist attacks at the World Trade Center, the Pentagon and in the fields of Stoneycreek Township, PA. I was at ground zero that day, as was my middle brother. We both managed to flee and survive. Personally, I don’t work on 9/11 and think of the Mourners Kaddish, the Jewish prayer of bereavement that day. Feel free to commemorate that day as you desire, but don’t forget what happened nineteen years ago.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was not long any positions mentioned – although positions can change at any time.
Scott Rothbort is the President & Founder of LakeView Asset Management, LLC, a registered investment advisor specializing in high net worth private wealth management. For more information on investing with LakeView Asset Management, LLC call us at 888-9LAKEVIEW or request more information by clicking on the contact button on the top right-hand corner of the website. LakeView Management, LLC is a Nevada LLC, with its principal office located in Henderson, NV and branch office located in Millburn, NJ
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