2015’s Trendless Markets Make It Hard For Investors

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If we had to name 2015, we would go with “the trendless year.”

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We are halfway into the year and markets have barely made any moves. There has been a lot of hesitation among investors since the start of the year. Sometimes markets need a pause before they either continue with their previous moves or change directions. Interestingly, we are witnessing the same behavior in commodities, stocks and currencies.

CRB (in red) vs Dow Jones Industrial Average (in Black) since 2014

CRB Commodity index (in red) vs Dow Jones Industrial Average (in Black) since 2014. Source: MetalMiner.

Equity markets are pretty much flat this year. Investors had an easy time making good returns over the past few years but they are now probably having a hard time dealing with the sluggish behavior of stocks and many are wondering if we are at the end of the bull market.

In the same manner,  commodities are pretty much flat this year as investors vacillation rises. After four years of a bearish market many investors might be wondering if we are finally at the bottom. With the falling commodity market, materials and energy were the two worst sectors in the stock market as growth-minded investors looked for other alternatives. On the other hand, many value investors might be looking at these two sectors, trying to spot some bargains.

Adding Value?

Value investors are good at holding stocks through market turbulence, but not good at timing their buys. Industrial buyers on the other hand can’t afford to “hold” in their forward buys while prices keep falling. For this reason, we always recommend not to be a “value buyer” when doing your job and instead wait for real evidence that the trend has changed.

Finally, currency markets are also trendless this year. After the huge appreciation of the dollar against other currencies, the dollar is now trading sideways.

No one knows how much longer this trendless period will last, but sooner or later we will see significant movement in these markets. Whether these markets will continue with their previous move or make a turnaround is something that we can’t answer yet…

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