Market Update Summary (Oct 2020):

• We are predicting near-term downward movement in the markets as we look at some technical indicators such as support lines, a possible double top and the uncertainty around the upcoming presidential elections.
• The tech space has done very well and still looks okay in many places, we think it is overvalued at the moment and not the right time to be infusing capital right now.
• We continue to point out that only a few companies, mostly in the tech space, are lifting the entire market. This is not a healthy sign for the market as a whole when so few companies are doing well.
• Because of these factors, our current strategy is a pause / wait and see before we make any major entries or take major positions.
• Willow’s Future Theme #1: We see the US dollar eventually loses the spot of reserve currency. As crude oil dependence, which is tied to the US dollar, and as continues to diminish over time, and as the US is now less than 30% of GDP, we think in the future the US dollar will not be the dominant currency. This trend accelerates as our monetary system continues to create and infuse more dollars into the economy, and as we accumulate more debt as a country. While we still have a while for this theme to play out, as investors, we are paying attention to the emerging digital currencies space as well as precious metals like gold.
• Willow’s Future Theme #2: Inverse stagflation means wages continue to stay stagnant while the price of things we need continues to rise. This feeds on the widening wealth gap in our country and ultimately creates an environment where consumer spending is impacted, which significantly impacts our overall economy. Small business feels this crunch most directly. This influences our strategy of keeping some exposure in the markets to gain enough growth to balance the diminishing value of a conservative/cash-based portfolio.
• Willow’s Future Theme #3: Farmland + Water are resources we believe will become more and more valuable in the future. Climate change, water misuse and even consumer shifts to mainstream organic food consumption and the main drivers of this theme. As investors, we keep active exposure in water infrastructure and farmland.  Our upcoming edition of Green Matters has a link to a great movie about regenerative agriculture and its role as a possible solution to climate change.
• The data continues to show that companies who are paying attention to environmental and social impacts (water usage, as an example) do have higher profit margins.  Our proprietary ESG screen confirm this over and over again across a variety of social & environmental metrics, and we are able to pass these findings onto our clients through our targeted investment selections.
• A bit more on elections: One of our key indicators of market volatility is spiking more leading up to this election than it has leading up to previous elections. This tells us this election is causing some uncertainty in the markets and a clear winner isn’t obvious yet.  Markets don’t respond well to uncertainty, so we suspect we will see continued volatility and downward momentum until some certainty is reached. 

As always, we are diligently tracking current market conditions and future economic outlooks so we can position our clients as strategically as possible. We encourage everyone to do your best to reduce stress over this next month approaching elections. Take loving care of yourself – perhaps a walk in this beautiful autumn weather would be a perfect remedy.

To set up a meeting to discuss your portfolio, please click here or give us a call.

Best regards,

The Willow Team
+1 413 236 2980

Market Update Summary (Sept 2020):

• COVID-19 continues to impact the economy, though number of deaths continues to come down.
• Our biggest concern for the economy related to COVID-19 is the small business sector. Data continues to show that small business has not fully bounced back yet and will likely take a while to come back online. Small business revenue is holding around 10-20% down. 
• Regarding employment, we’re seeing about 48% recovery of job losses. Part-time job recovery continues to be stronger than full-time job recovery.
• Our proprietary index for giving us a pulse on consumer health (which makes up 70% of the market) shows the consumer has not yet recovered to pre-COVID levels, although Fed intervention has prevented consumer health from dipping as low as it did in the Great Recession (2007-2009). The Fed has currently purchased about 1/3 of all mortgages to keep that sector propped up.
• The US Dollar continues to weaken, as we’ve been following and predicting for many years. Gold has reached a new multi-year high as investors flee for security.
• We believe the current conditions are signaling potential stagflation – higher prices, weaker economy, potential recession.
• Inflation expectations continue to be built into the markets.You might be personally seeing this in retail price increases as well as increases in education, health care, fees, taxes, etc.
• The news of market rally and all-time highs has to be seen through the lens of market breath, where it’s clear that the majority of companies are not hitting highs. Our technical analysis of the market has us watching out for a bull trap and we predict we are approaching a slow topping of the market.
• Our proprietary market dashboard is flashing concerns in the areas of earnings and revenue across many sectors (except healthcare and technology).
• We continue to invest strategically in strong sectors (technology, healthcare, communication) and along our themes, which include the stay-at-home economy (technology, healthcare, communication), the weakening US dollar & ongoing price increases (pointing to utilities, consumer staples) and market alternatives like gold, cryptocurrency and land-focused real estate.

As we head towards autumn in these unprecedented times, we thank you for your continued trust and confidence. We diligently track market conditions and future economic outlooks so we can position our clients as strategically as possible, and we always strive to offer helpful, friendly and competent service customized to your needs.  To set up a meeting to discuss your portfolio, please click here or give us a call.

Best regards,
The Willow Team
+1 413 236 2980

Market Update Summary (August 2020):

• The US Dollar continues to following our long-term prediction losing its strength as the reserve currency. 
• The trend is moving towards digital currency, which is being accelerated by the current climate of COVID-19 hygiene practices as we are discouraged from passing paper money from hand to hand.
• Gold has broken out to a place with no overhead, which means gold has never seen these prices before. This is a significantly bullish trend and indicates instability plus more evidence of an inflationary environment. 
• GDP is down by 32%, which is a record-level.
• The news is reporting that 90% of companies have reported beating their earning estimates. We want to point out that this is only after reducing estimates drastically. The true growth rate in the S&P is actually down 33% and revenues are down significantly.
• Small business revenue is not just flat, it’s actually declining.  As small businesses make up a majority of our economy, this is concerning. 
• The S&P 500 is showing a V-shaped recovery despite poor earnings this year. This current run-up generally comes with a pull-back, which could happen in September when liquidity tightens. 
• We are currently keeping some cash available to make strategic moves when they opportunities arise, as well as exposure in markets as they continue to defy current economic indicators. We have also taken some hedge positions to the US dollar in assets such as gold.

We hope everyone is enjoying the summer. We are diligently tracking current market conditions and future economic outlooks so we can position our clients as strategically as possible.  To set up a meeting to discuss your portfolio, please click here or give us a call.

Best regards,

The Willow Team
+1 413 236 2980

Market Update Summary (June 2020):

• When we look at risk indicators, we take into account both the data and what’s happening on the ground in communities to give us a better ability to interpret the meaning and implications of the risk in the system.
• Risk indicators have come down following Fed’s widespread intervention. We continue to hold that significant risk remains in the system until we fully understand how the economy integrates once federal stimulus supports are removed.
• The Fed intervened again this past week with a billion dollar support to buy up struggling corporate bonds, so we are still far from witnessing an economy that can stand on its own without federal support.
• The public education sector is just one of the many that is struggling to re-emerge in our current economy. Widespread budget deficits are creating drastic plans for closures, workforce reduction and costly safety protocols that will impact communities across the country.
• We are calling for federal intervention not just in the corporate space but in the municipal space as well to help ease the impact on our communities and not just massive corporations.  The fed did offer municipal support in earlier stimulus packages so we hope this is still on their mind.
• We take a peek at what the data is showing for COVID-19 cases, testing and fatality trends in the US.
• We believe the biggest risk in the system is unemployment, as the data is still significantly elevated. Unemployment assistance ends at the end of July and we are paying close attention to what will happen to all of these people and how the economy will respond.
• Large companies are performing best right now. Just 5 companies, referred to as FAAMG, are up 23%. However if you remove those 5 companies, the entire rest of the S&P 500 is down. This was a trend we pointed out last month and it continues to play out. This trend causes confusion in the markets as it sends a signal that the system is stronger than it really is.
• We’ve taken on new positions, as our clients know, and continue to look for strategic opportunities to capture value in market movements. We like how the technology sector is playing out and feel this will continue to be a strong sector into the future.
• We are not rushing to re-enter the market. A few successful companies does not point to an overall healthy market system or a solid economy. We believe we are stronger keeping a cash cushion, especially moving towards September.
• There tends to be a liquidity/cash crunch in the markets as we approach September. If a second wave of a pandemic hits around this same timing, we expect to see a negative impact on markets.

We hope everyone is doing well. We continue to monitor and research the current conditions and future outlook diligently.  We are always available to discuss your portfolio or your individual situation.  Please contact us with any questions or to set up a meeting.

Best regards,

The Willow Team
+1 413 236 2980

Market Update Summary (5/29/2020):

• New data shows 47% of small businesses surveyed will not be able to restart their businesses post-pandemic.
• We are concerned that record high unemployment numbers (almost 60 M unemployed) will remain higher than anticipated if these 47% of businesses are not able to reopen and rehire.   
• We do not believe the market is fully accounting for this supply/demand discrepancy in jobs, and we are playing attention to longer-term implications and market corrections.
• We question how long such widespread unemployment support can continue to prop up the economy and we are watching closely to see what will happen when this relief runs out and workers attempt to re-enter the workforce.
• A critical look at the market shows that only 5 players are responsible for the rally we have been seeing recently. Remove those 5 companies and the remainder of the S&P 500 is down 8% YTD.  
• A stock market isn’t truly healthy beneath the surface when the market strength is concentrated within 5 companies. We want to see more wide-spread gains across more companies and sectors before we will feel confident that we are on solid ground. 
• We just hit an important technical indicator, the 200 Day Moving Average. If we can consolidate here and begin to see more companies participating in the market upside, we will feel more confident about market conditions.
• There is good liquidity in the market and our risk indicators are tightening, but the risk levels are still too elevated for our comfort.
• We’ve added a few strategic positions to our portfolios and continue to evaluate other positions for the right deployment of our cash reserves.
• We are moving slowly and in no rush to re-enter as we watch closely all of the compounding factors that will signal the future direction of our market and economy.

We hope everyone is doing well and spending some time outside in this beautiful weather!  Please contact us with any questions or if you’d like to discuss your account.

Best regards,

The Willow Team
+1 413 236 2980

Key Risk Indicator Updates:

• Significant Fed intervention has worked in the short term and is yielding liquidity in the REPO market (which is the oil in our economic engine and points to credit availability). We are watching to see if this will hold, especially when stimulus backs off.
• Fed loans like PPP have caused commercial paper (corporate liquidity) metrics to move in the right direction. The data is still elevated, but we like the direction it is headed.
• During past financial crisis, businesses were still operating. We are paying close attention to the effects of this shutdown and how the ramp-up period will play out as the economy comes back online.
  
• LIBOR spread spikes can signal problems in financial markets. The current spike has pulled back significantly, but we are still seeing this indicator holding at levels similar to last financial crisis.
• The risk of investment-grade corporations going bankrupt is still elevated. Again, it has come down, but we would like to see this normalized.
  
• Our housing market data is showing big questions about the health of this sector. We are keeping a very close eye on this data, as it tends to be a leading indicator for the entire market.
• We continue to see record levels of unemployment and drops in manufacturing. However we are also seeing income levels holding steady or increasing slightly with unemployment relief, which may help keep the economy steady. The full implications of these significant metrics will take time to play out.
• The back & forth movement in the market right now is actually a good sign, as it shows the market may be consolidating at this level. But it would not be unusual to retest the low end of the market drop, even at this point.    
• We are suspect of how everything will play out as the economy tries to come back online. Our risk indicators still warrant caution and we will be very mindful going forward.
• We are not on solid ground yet and we will continue to keep a conservative position with our portfolios until we know more about the trend of longer-term impacts. 
  
• We are in a good cash position to take advantage of opportunities with companies that are benefiting from current market conditions.

Wishing you health, peace and prosperity.  Please don’t hesitate to contact us with any questions or concerns.

Best regards,

The Willow Team
+1 413 236 2980

Key Takeaway Messages:

• Risk is at the forefront of our work and as such we look at many indicators and data points/trends to analyze the amount of risk in current market conditions, and how much exposure we should have with our client portfolios.
• REPO market, which points to credit availability, has responded positively to Fed stimulus. We are watching to see if this will hold.
• The promise of “unlimited cash” into our economy from the Fed is having positive short-term effects. We are paying very close attention to the longer-term implications of the Fed intervening in such a big way, as such an influx of cash can lead to economic instability.  
• We do not underestimate the net impact of easy money from the Fed and central banks around the globe. This tends to grab hold eventually and get things moving.  
• Commercial paper (corporate liquidity) has improved a bit with the stimulus, but it’s still too elevated for our comfort. We are watching this closely as well.
• The small business sector is being significantly impacted by current conditions. We are monitoring how this will continue to play out in our overall economy and markets. 
• Banks continue to be cautious about lending to each other. We are still better off now than 2008, but this is a trend we are monitoring closely.
• Credit default swaps (probability of company default) are not as high at 2008 and have come down a bit which is a good sign. 
• Record levels of unemployment and drops in manufacturing, each leading indicator of where the market is going, is at significantly higher levels than past recessions. This is obviously very concerning due to the fact that the consumer is 70% of the economy.
• Consumer confidence is beginning to trend downward. Past market corrections and contractions have been isolated to a few sectors, but the widespread and global impact of this current pandemic continues to have far-reaching implications, including consumers becoming more conservative.  
• The market has completed the 50% retracement that we expected. We are watching all of the data now to see what directional trends will emerge from here. All of our key indicators have improved but warrant a wait and see. 
• We are starting to see the Coronavirus curve flatten in the data, which is a good sign. Now we need to see how the economy begins to come back online, what longer-term effects are going to play out and how much damage has really been done to capital markets.
• The economy was doing exceptionally well before this crisis, so we will see how much that strong starting position can help us rebound.
• We will continue to keep a conservative position with our portfolios and maintain healthy caution until we know more about the trend of longer-term impacts. We are watching closely for our indicators to tell us the right time to re-enter the markets, and our data clearly shows that this is not the time. 
• We are in a good cash position to take advantage of emerging opportunities with companies that are well-positioned for the recalibrated economy…when we feel the time is right.

As always, it is our deep honor and pleasure to serve you and we thank you for your trust in us. May you have health, peace and prosperity.  Please don’t hesitate to contact us with any questions or concerns.

Best regards,

The Willow Team
+1 413 236 2980

Key Takeaway Messages:

• REPO market has responded positively to Fed stimulus, which is a good sign.
• Banks continue to grow cautious about lending to each other, despite the Fed stimulus, which is a flag for us. We are watching this very closely.
• Commercial paper (corporate liquidity) has come down a bit with the stimulus, but it’s still too elevated for our comfort. We are watching this closely as well.
• Credit default swaps (probability of company default) are not as high at 2008 and have come down a bit since the stimulus, which is good, but still have a long way to go to signal a healthy market.
• Unemployment data, which is a leading indicator of where the market is going, is at significantly higher levels than past recessions. This is obviously very concerning. 
• The market has completed the 50% retracement that we expected. We are watching all of the data now to see what directional trends will emerge from here. All of our key indicators warrant caution.
• We are in a good cash position to take advantage of emerging opportunities with companies that are well-positioned for the recalibrated economy…when we feel the time is right. 
• We maintain a cautious position and we are watching for our indicators to tell us the right time to re-enter. 

Thank you for listening and for allowing us to serve you. May you have health, peace and prosperity.  Please don’t hesitate to contact us with any questions or concerns.

Best regards,

The Willow Team
+1 413 236 2980

Video Highlights:

– After a big market drop, it’s typical to get a “bounce” that could be as much as 50% of the previous high. While it might look like the market is returning, we’ll show you why we don’t believe a “V” recovery is possible right now.

– With low consumer confidence (consumer makes up 70% of the market), high unemployment and still unknown toll of Coronavirus, we are not seeing any signals that the market is ready for a turnaround quite yet.

– We make moves based on data, not hope or hype. We continue to stay conservative and defensive.

– Right now we like sectors such as tangible assets (water infrastructure, farmland, etc), necessities (utilities, consumer staples) and technology (cloud computing, remote tech/remote health care).

– We continue to encourage leaders to see this as an opportunity to bring our existing structures into question and rebuild systems that are more equitable, sustainable and conscious.


As always, a deep bow of gratitude to you our clients. Please don’t hesitate to contact us with any questions or concerns.

Best regards,

The Willow Team
+1 413 236 2980