I heard a term used by Jim Cramer the other morning on CNBC. He claimed (several times) that we were in the midst of a Rolling Bear Market. I can’t claim to have familiarity with the term so I embarked on a little research. The earliest reference I found was an article by Bob Carlson which defines the term. Essentially the argument is that there as now an ebb and flow to the markets, like a wave, that is rolling in on sectors. Like energy, then materials, then financials and so on.
A further argument could be made that a similar wave could exist across geographic boundaries. In 2016 we saw Greece, Puerto Rico, Russia, China and others pummeled on any given day for a variety of reasons. Perhaps the rolling bear has taken up residence in the currency markets. Or across asset classes – look at hedge funds as an example.
In the US, outside the energy sector, you’d be hard pressed to identify a bear market – rolling or otherwise. Certainly we would all like to see stronger growth, but when placed in context with the worldwide economy I can’t complain too vigorously. Using my portfolio as a barometer, halfway through the first quarter 29% have announced dividend increases averaging 10.9%. Two of these (TRP and AIG) reported a quarterly loss. One (PJT) initiated a dividend. I actively monitor one company’s (CVX) dividend status. All in all, no major issues are evident.
Henry Miles published an article that emphasized the need to review a portfolio for counter party risk. While my Six Degrees post highlighted the synergies, Henry identifies some pitfalls to concentrated investing. But still, we haven’t addressed the core concern. Cramer speculates ETFs play a part in Rolling Bear markets. I can see ETFs increasing the volatility but not directly the severity. I don’t believe it is directly an issue with earnings, jobs, the Fed – maybe oil.
I would speculate that the turmoil in the markets is a direct result of the Law of Unintended Consequences. The oil glut is forcing OPEC countries sell portions of their Sovereign Funds to meet budgets. This results in lower AUM (and fees) by multiple funds. I would suspect this cycle will continue until oil completes its’ bottoming process. Which is my explanation as to why there is seemingly little logic with current market activity.