The Trend Prophets Newsletter for February 12, 2024
Hi reader,
In this issue of Trend Prophecies, we look at:
- US and Canadian markets continue to reach new all-time highs.
- US inflation for December was revised down prompting a cheer from the markets (and investors!).
- ARKK is one of the ETFs you either love or hate because of periods of steep losses. Trend Prophets removes most of this downside and gives you the best of both worlds: exceptional growth and downside protection.
Market Update
Most major markets continued to hit all-time highs over the past two weeks. The international indexes seen in table 1 are negative year-to-date because of the US dollar appreciating. These are very healthy signs given that earnings season has been mixed. It is also very encouraging to see analyst estimates for S&P 500 earnings increasing.
We can easily argue that the markets are slightly overbought now, but the longer-term trends are all positive. At least for equities. Rates have increased over the past couple of weeks after the recent jobs report two weeks ago that showed incredible strength in the labor market. Furthermore, Jerome Powell continues to pour cold water on the market’s belief that 5 rate cuts would come this year. The Fed is now saying 2-3 are more likely, and I would agree. Fixed income markets retreated as a result.
Bitcoin is one fire again! The approval and launch of US spot ETFs for Bitcoin, didn’t have an immediate effect on the price of the digital currency. However, last week saw an 11% increase. Investors could be anticipating the effects of the halving event that will likely occur in April, which in the past has been positive. Trend Prophets subscribers were rewarded with a 40% gain in Marathon Digital since the last buy signal.
Table 1: Index performance, as of February 9, 2024. Source: EODHD, Trend Prophets
In any event, the markets clearly want to keep going up. Last week, US inflation (represented by CPI) was revised down for December and that provided a nice boost to end the week.
Figure 1 shows the month over month change of headline inflation and core inflation. Core inflation removes food and energy prices from the index because they are very noisy. The Fed focuses more on core inflation. The downwards trend continues and this augers well for continued equity strength barring any unforeseen events or surprising Federal Reserve actions.
Figure 1: Month over month change in headline and core inflation. Source: Federal Reserve Bank of St. Louis.
The Best Way to Own ARKK: Use Trend Prophets!
ARKK has become the ETF that you are either going to love or hate.
While ARKK was the darling of the market in the post-COVID rebound of 2022, its crash in 2021 and 2022 left many who bought at the peak badly bruised and disillusioned with Cathy Wood. Even this year, where tech and higher risk equities have enjoyed great returns, ARKK is still trading down -5.29% as of February 9.
ARKK’s volatility is extremely high compared to most other US equity investments. At close to 38% annualized, investors need to be able to handle the swings and the drawdowns.
This is why ARKK with Trend Prophets is such a powerful and necessary combination.
Trend Prophets works by identifying the underlying long-term trends of ETFs and sends signals on whether to be invested or not invested. When dealing with ETFs and assets as volatile as ARKK, the benefits of adding the downside protection overlay are astounding.
The easiest way to illustrate this is to look at the most negative periods experienced by ARKK.
Table 2: Calendar year performance for ARKK. ARKK – Buy and Hold represents buying ARKK and not using the Trend Prophets system. Source: EODHD, Trend Prophets.
2021 showed a -22.69 loss. Following the Trend Prophets system would have resulted in an impressive 37.6% increase!
Why? Because our system got you out before the major declines occurred.
In 2022, ARKK was down close to -64%! Following our system, that catastrophic decline would have been only -14.76%. I know this might not seem that impressive, but when you focus on the long-term, this has major implications in creating wealth.
In 2023, our system was up 65% while ARKK was up 62%. This is a great example of how we can recoup the losses from the previous year and create wealth.
Another way to see the power of what we do is by looking at a drawdown graph. Drawdown graphs are also known as underwater graphs as they show you the extent of declines from a peak value. Looking at the graph below, we can see that the decline since the previous peak value of ARKK began in late 2021. The Trend Prophets strategy has essentially recouped the entire loss, while had you simply bought and held ARKK through this period, you would still be down over -61%! I’m sure you would agree that is an impressive result!
Figure 2: The drawdown analysis of using ARKK with and without Trend Prophets is a clear demonstration of the power of what we do.. Source: EODHD, Trend Prophets.
Trend Prophets is a must for volatile strategies such as ARKK and Marathon Digital. We strive to protect capital against the significant drawdowns that occur while participating in every rally. We know that ARKK has many fans out there, but some might complain about the downside risks. Using Trend Prophets is the perfect solution, providing the benefits of owning ARKK, yet protecting against the negative experiences seen in the past.
Don’t wait. Subscribe today and see what we can do for you.
That’s it for this edition of the Trend Prophets newsletter! Please contact us at info@trendpophets.com for any questions.
Cordell L. Tanny, CFA, FRM, FDP
President & Founder
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Disclaimers: Past performance is no guarantee of future results. This newsletter should not be considered as investment advice and is intended for information purposes only. Please see our Terms and Conditions for all disclaimers.