Wealth Watch: Remaining Calm Amidst Major Selloffs

May 20, 2022

From the desk of Vance Howard:

The HCM-BuyLine® is clearly negative, and we are sitting on a lot of cash. As it stands now, we are approximately 50% in cash and being patient is key. The markets will turn, we just do not know when, but we are in a very unique position with all the cash we have on hand. Our buy list a few months back was a page or two, now it’s a scroll. Lots of great companies have really dropped down in price.

We are not calling for a bottom, but there are some very interesting statistics on making a case for a bottom in the near-term.

^{_{Source: Bloomberg}}

Cash levels lining up at the highest levels in more than 20 years indicate the 2022 selloff is likely in its late stages. The first key takeaway from May 2022’s Bank of America (BofA) Fund Manager survey revolves around the levels of cash balances now being held in Assets under Management (AUM). As seen below, these have reached the highest levels since 2001, over 20 years ago.

21% of stocks are above their 200-day moving average and 79% are below their 200-DMA which means the odds are 89% that stocks are higher in 12 months. Historically speaking, when stocks have had this kind of selloff markets have tended to see a bottom.

The past week put the S&P 500 into a waterfall selloff seen only 18 times since 1940. During the week, stocks were down 5% for the week and had declined 16% in the past 5 months. Declining 16% in 5 months is a waterfall collapse. Waterfall declines show investors are now liquidating stocks with emotional fear taking hold. There are 13 waterfall selloffs since 1970. In 9 of the 13 most recent instances, the S&P 500 was often near the end of its decline.

Markets are in a bad way, but companies are still making very good money: Of the 458 companies that have reported so far (92% of the S&P 500), overall earnings results are beating estimates by a median of 9%, and 76% of those reporting are beating estimates in general.

Vance Howard

_{This communication is issued by Howard Capital Management, Inc. It is for informational purposes and is not an official confirmation of terms. It is not guaranteed as to accuracy, nor is it a complete statement of the financial products or markets referred to. Opinions expressed are subject to change without notice. Howard Capital Management, Inc. may maintain long or short positions in the financial instruments referred to and may transact in them as principal or agent. Unless stated specifically otherwise, this is not a recommendation, offer or solicitation to buy or sell and any prices or quotations contained herein are indicative only. To the extent permitted by law, Howard Capital Management, Inc. does not accept any liability arising from the use of this communication. Howard Capital Management is an SEC-registered investment advisor which only does business where it is properly registered or is otherwise exempt from registration. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the advisor has attained a particular level of skill or ability. Past performance is no guarantee of future results.HCM-011222.01}