Transcript
Hello, everybody, welcome to Wednesday, the S&P 500 was up .2%. Today, the big news was that the Federal Reserve met today and announced that they’re going to continue the same pattern that they have for their bond buying, that they’re expecting to keep interest rates down near 0%. Like we’re seeing right now, for the next three years, which if they’re able to do that, though, stock market could have a really good run here.
Actually, that’s a really big catalyst for the stock market. And we’re still waiting on the stimulus bill does seem to be getting closer, the news seems better each day hasn’t happened yet. So we’ll have to wait and see what happens there. The key thing I want to talk about today really is something that I think is very important. And it’s really how to take advantage of downturns. And it’s one of the strategies that we’ve used this year, quite extensively. And it’s worked really well.
So let me let me explain I’ll show you here in a chart. So this is the S&P 500. And I’ve stripped out all the other pieces just to show you the price here. And what we’re looking at, in my opinion, are these downturn periods, so February, March, another one in June, September, October, and then this one day right here is actually fairly significant. So when I pull all of the data on the 2300, you know, ETFs, that we’re following and trying to search through, you know, we pull up all the normal stuff for the rate of return for the last one week, one month, three months, six, 9, 12 months. But some of the most important data is actually how those ETFs did in these downturns, how they do here, here, here, here and here. And so what I’m looking for, so here we are, the markets falling, and we’re in the middle of March, examining those ETFs, to see which ones are following slower than the market itself. And that’s really, really critical, because two things, if I start to buy those, historically, what I have found is that I fall less than the market as it continues down.
Not always, but more often than not. But more importantly, when there is a recovery, those same holdings tend to bounce up even higher, the market is sending a signal saying we like these particular holdings. So for example, in this timeframe right here, when you look back, you’d see well, software was doing well, because it’s still going to be needed. You know, as everybody got locked down. Big technology, companies like Apple and Microsoft are going to do well here, which they did. And we purchased that at that time, advanced medical care was needed, because that’s the Modernas of the world, they developed the vaccine, those were falling, you know, at a much lower rate than the market, consumer staples, were falling at a smaller because people still need toilet paper and food and such. So you would then maybe rotate out of some of your holdings that you have that are falling faster than the market and buy some of those things that are falling slower. And so it’s the same thing as it goes through each one of these downturns you want to examine the what’s happening, the market is giving you a signal in a downturn that they like these, and they’re not selling them off.
And what we’ve seen, especially this year is if you buy those, you often get these big bounces. And so that’s where, you know, for example, in this downturn, we saw that clean energy was falling at a much slower pace in the market. And we loaded up on clean energy, and we’ve done really well there. So here in this particular movement, this was the day that Pfizer announced their kind of preliminary results, which were quite good. And we saw a very violent rotation into these value type stocks, the companies that would need a vaccine to really take off. And I was able to go in and examine this little timeframe here and look and see which value indexes they liked the most. And that’s what we bought. And it’s done quite well so far.
But I think the best is yet to come for that is that vaccine starts to take hold. If it does, we’ll start to see even more rotation into those value stocks. So again, you look for these significant periods, and you get more data and more information about what to do going forward than you do you know, out of some of these run up periods. So overall, that’s a strategy that we’ve used. I’ve been asked several times, you know, how do we kind of find you know, what we’re doing that’s it a really pull up all of these downmarket pieces to go with the average rates of return and combined together that kind of gives me some ideas for for where we might want to go. So I want to thank you very much for listening today. I’m really looking forward to talking to you again tomorrow. Let’s see what happens here with the stimulus plan. Thank you very much.