Market Update October 2020

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