Volatile Technology & Rising Rates

Volatile Technology & Rising Rates

Posted on March 22, 2021
In Case You Missed It
Below is last week's video update from Canterbury discussing the markets and portfolio.



Technology Stocks
Take a look at the chart below, which shows the Nasdaq 100 (an index composed of mostly technology-related stocks).  The chart also displays the Canterbury Volatility Index (CVI).  You can see in the chart that the volatility of the Nasdaq has been increasing, and over the past few weeks has risen by 36%.  Additionally, notice that the index has put in a series of lower highs right its moving averages (Green 50-day and Red 21-day).  These averages can often act as support or resistance, and in this case is acting resistance.  The increase in the Nasdaq’s volatility is alarming for the strength of the markets. It will be interesting to see how the index continues to behave moving forward.


Source: AIQ

Large Cap Value
Compare the chart of the Nasdaq to a chart of Large Cap Value stocks.  Rather than a recent series of lower highs, and higher volatility, you see decreasing volatility coupled with higher lows in an uptrend.  Now, there is no telling how long favorable or unfavorable characteristics will stay in place, but today value is outperforming growth (technology) on a risk-adjusted basis.


Source: AIQ

Market Comment
Here is a quick comment on bonds, specifically treasury bonds.  The chart below shows interest rates.  Over the past 7 months, interest rates have been increasing, causing the price of treasury bonds to fall.  The blue zone of the chart is called a channel.  You can see that as interest rates have increased, they have fluctuated between the upper and lower ends of that channel.  Now that rates are at the upper end, they would be considered “overbought”, or due for a pullback (meaning bonds would go up).  Keep in mind, this is a leading indicator, and has yet to be confirmed.  Interest rates can continue climbing and being in overbought territory before pulling back.


Source: AIQ

Bottom Line
Markets, equities and bonds, will continue to ebb and flow.  The Nasdaq has been volatile as of recent and is showing signs of remaining that way.  It will probably continue to have large outlier days, both to the upside and the downside.  These large swings can cause the emotions and opinions of investors to shift dramatically.  That is why we have an adaptive investment process.  We want to remove emotion and look just at the facts of the markets and adapt our portfolio accordingly. 
 
   
Canterbury Investment Management: Tom Hardin

More About Tom Hardin

As Chief Investment Officer, Tom has more than 30 years of experience in the investment management industry and has a broad breadth of knowledge. He is known as an innovator, educator and has been revolutionary in the advancements of portfolio and risk management.

 
Canterbury Investment Management: Tom Hardin

More About Brandon Bischof

Brandon is directly responsible for managing the Canterbury Analytics Group (CAG). To date, Canterbury Analytics Group has played an important role in advancing portfolio management from a loose art form based on subjectivity and obsolete assumptions to an adaptive process with scientific rules and methods capable of providing evidence based results and statistically relevant value add results.


Every effort was used to provide accurate data and mathematical calculations to provide, what we believe to be, accurate results. Canterbury Investment Management, LLC, and its principal owners, make no guarantee of completeness or accuracy of data or calculations as well as conclusions of any statistical data or information contained in the simulation illustrated on this page. Past results or performance is in no way a guarantee of future results.