Easter, Baseball and the Promise of Spring

By Jeff Kelly on March 30, 2018

“It’s spring fever. That is what the name of it is. And when you’ve got it, you want—oh, you don’t quite know what it is you do want, but it just fairly makes your heart ache, you want it so!” 
Mark Twain

I have always loved Easter. As a child I loved the basket left on the front porch by the Easter Bunny. I loved the marshmallow eggs covered with chocolate most of all. When our children were little Easter brought another blast of joy. We have terrific memories of Easter eggs hunts, egg dying sessions and dresses that were complimentary but not matching…never matching!

Today is opening day for Major League Baseball in many cities. This too has great memories for me as a child. When I was very young San Diego had no major league team. My Dad and I were big Los Angeles Dodger fans. We would listen to the games on the radio. It was always a big deal when the games began in April. My fervor for baseball as a sport has declined over the years but the memories of those evenings and a simpler time will stay with me for ever.

Both Easter and the advent of the baseball season remind us of the approaching Spring. Spring gives us new growth, the thawing from winter and the promise of summer soon to follow. Easter at it’s core is about resurrection and second chances. On the first day of baseball season all teams are full of potential and hope. The idea of spring with the lifting of winter, warm hints of sunshine and new flowers in the field is also about resurrection and second chances.

In the financial markets it’s spring as well…for some and the on set of winter for others. The financial press bombards you with the daily news making each trading session a death match between good and evil. In a never ending quest to fill time and produce ratings they breathlessly explain what occurred with their less than accurate reason for the moves. Most trading sessions are just another day. They aren’t filled with unspoken meaning about your financial future.

Our views change when the data changes. We aren’t driven by the latest tweet from the oval office or the latest news on the Facebook scandal. Volatility is not a bad word. Volatility breeds opportunity even when it feels terrible. Sometimes the markets make little sense. It’s really okay to say that. Up 500 points one day down 400 the next. We would prefer to look at the larger picture. Is your assets allocation right? Are your cash flow needs met? Is your plan working on a long term basis.

Currently we see the market in a more difficult place than it was through much of 2017. We see what could prove to be a successful retest of the February lows. On the other hand we have the economy and the data beginning to slow. We observe the ten year treasury bond trading with a yield of 2.741% (data from FactSet). Immediately after the Federal Reserve’s latest interest rate increase the yield was close to 3%! I remember the pundits saying rates would never go down again. In fact today they were down with a nice rally in the equity market.

It is very interesting to me that the savings rate has jumped for the second month in a row. It rose to 3.4% in February (latest data). It’s up 100 basis points in two months. (data from Hedgeye) It was the view of many that tax cuts would be spent. Doesn’t it change the game if they are saved instead? Can the markets be sniffing out a consumer that has become a bit more worried by the on going avalanche of negative news? Particularly interesting is the decline in consumption of luxury goods.

Source: Hedgeye

Source: Hedgeye

Should this news worry you? No. It does tell us things are slowing at the margin. We think it’s time for some more high quality fixed income and less high growth equities. No doom and gloom here. Markets change and evolve over time. One of our goals when we began our firm was to preserve and protect as well as grow our clients capital.  At this stage we have only seen small negative changes in the data but we are on guard.

It’s long been our position the equity market will have a difficult second half of 2018. This is also not something to fear. As we began this post we talked about the promise of Spring and the rebirth of growth. Spring only occurs after Winter. We will continue to watch the data and let that guide us to the spot where we can once again see the growth of Spring, the Easter dresses and the optimism of the new baseball season.

I hope you have a wonderful weekend. Make sure you get some of those chocolate covered marshmallow eggs. They are the best.