I have been looking back at a lot of historical data on the markets and most of the time I would say that just about all bear markets are the same. However, this bear market is quite unique. We have a very good economy, unemployment is very low, basically anyone that wants a job has two waiting for them, our banking system is very strong, companies are making very good profits, and wages are up. But, and here is the difference, the Federal reserve is trying to kill all that. In the late 70s Paul Volker was Fed chair and he raised rates to double-digit levels to stop rampant inflation, but unemployment was high, the economy was weak, and there were a lot of other problems during that period of time. Why are things so good yet the Fed is trying to destroy it all, and why is this time different? This is an easy one: Covid-19, the pandemic! No question about it, the federal government threw out too much money and started printing money like there was no tomorrow. These are clearly my opinions and I’m sure some will totally disagree, but we never should have shut down the economy like we did. I was in Texas, and we basically shut down for about 4-6 weeks while other parts of the country shut down for months on end. Johns Hopkins University came out with their findings that said, “ill-founded Covid lockdowns did more harm than good” and “The researchers say lockdowns had no noticeable effect on reducing COVID- related deaths but had a devastating effect on the economies and social ills.” The report is on the web and easy to find if you’re interested. I can’t find anyone these days that has not had Covid. I have had it at least once for sure, and probably twice. So, where does this leave us? I have been trading the markets for over 35 years and I can say this has been one of the tougher markets to trade in that I have ever seen. 2015-2016 was challenging and I have enclosed a chart of the HCM-BuyLine® at that time. Remember, the HCM-BuyLine® has a 73% success rate, but it also has about a 27% failure rate. We trade a system and that is what our mission is, so when it fires off a buy signal, we take the trade even in uncertain times. The Covid-19 selloff in 2020 was very intense, and when the BuyLine went positive and gave us a buy signal in late-March/early-April, we took the trade as we should have. This was when the Imperial Collage was saying the United States would have well over 30 million deaths. Thank goodness they were very wrong, and in all candor they were irresponsible in making unfounded statements like that, but in the end 2020 was one of our most profitable years.
The HCM-BuyLine® did turn positive a few weeks ago on a short-and-intermediate time frame. This gave us some hope and optimism for the market to turn back up, just to drop straight back down after Fed Chair Powell stepped in front of the microphone a week back. We have since pared our holdings back down to about 50-55% invested. So, what is the conclusion to all this? If you trade a system, which we do, you must commit to the system and expect that not all trades will be winners, but over a full market cycle a good system should produce very strong gains. I make a long-standing joke that the only perfect system was Bernie Madoffs. He never had a drawdown or a loss! But until the SEC shut him down you must give him credit, he stuck to his system. LOL