This portfolio manager’s strategy uses just one ETF and its own “crash indicator” to beat the market by 530%

This portfolio manager’s strategy uses just one ETF and its own “crash indicator” to beat the market by 530%

Markets got off to a stronger start on Friday, but it’s been a rough couple of days as the S&P 500 faces a six-week losing streak, the longest in a decade.

With war raging in Europe, rising prices everywhere, and uncertainty about what central banks can do about it, investors may not experience the traditional lazy, hazy summer.

Provision of our call of the day is President and Chief Executive of Stock Traders Daily and portfolio manager at Equity Logic, Thomas H. Kee Jr., who prepares for a potentially bullish streak for stocks and says it’s all about understanding volatile days.

Kee said he sees a shift coming, but not one where investors can “buy and hold for the next 10 years.

“This is a market oscillation. In volatile times markets fall hard and then they rise, they fall and then they rise,” he said in a recent interview with MarketWatch. And since markets have fallen sharply, stocks are “ripe for a comeback.”

Kee warned clients of troubled times last December when the Fed began telegraphing that they were removing stimulus measures and “the demand-fabricated component of the demand variable” to indicate the return of natural risk perception.

“That means volatility. Under normal market conditions, you have volatile conditions,” he said. “It’s not what people are used to because stimuli have been a component since most people are in the market these days, especially all the new ones [investors].” Before 2010, markets were inherently volatile, he reminded us.

But since the ECB is still buying aggressively and the Fed hasn’t fully reduced its balance sheet, it means the fabricated demand is still there, he said.

While market volatility has left some investors uncertain and panicking, Kee said he sees no signs of imminent crash risk, based on his proprietary Evitar Corte model, which uses FOMC monetary policy to define market crash risk.

What should investors do with this information? Kee has long been a fan of index ETF strategies and suggested investors do the same and only buy or sell index ETFs – he prefers the highly liquid SPDR S&P 500 ETF Trust SPY,
+1.61%.
He warned that it will take much longer for investors with multiple stocks in their portfolios to control risk.

Since 2000, an investor has only invested in the S&P 500 ETF SPY,
+1.61%
and cash, which switched to cash when its crash indicator warned of high risk, but all other times it invested in the S&P 500 ETF would beat the market by 530%, Kee said.

Kee said there are two types of retail investors out there: those who like to trade and those who just want to hold and stay invested. The latter should just focus on neutralizing their portfolio and focus on a market crash model that will tell them if that’s coming and make it more nimble. The other investor who likes to trade just needs to look at the daily or weekly pivot points for the S&P 500.

Stock Traders Daily/Stock Logic

Right now investing in SPY is better than cash, but last December cash was the better investment, he said.

Kee said her Fibonacci calculator just triggered a buy for the S&P 500 at 3,884. “This calculator is customized for the stock market, based on mathematical formulas driven by human emotion, and without stimulus, that’s what the market leaves,” he said.

The money manager’s message is clear: “Volatility is there, it’s coming and you better be prepared for it and your portfolio better prepared to handle it. Because dealing with volatility is really difficult for people who have never experienced real volatility,” he said.

The Buzz

Twitter TWTR,
-10.08%
crashes after Tesla CEO Elon Musk said his $44 billion deal to buy the social media company was “temporarily on hold” as it calculates that “fake accounts” account for less than 5% of users.

robinhood HOOD,
+19.39%
pending news Sam Bankman-Fried, CEO of cryptocurrency exchange FTX Trading, has acquired a 7.6% stake in the trading platform.

confirm AFRM,
+28.82%
Shares rise after sales hit by Buy It Now Pay Later group and assurances from executives.

Heading into his second term as Fed Chair, Jerome Powell said in an interview Thursday that the Fed may not create a “soft landing” for the economy but is “not actively considering” a 75 basis point rate hike.

Import prices cooled off in April. May consumer confidence are still ahead.

Europe’s plan to sanction Russian oil is struggling as Hungary says it will prove too stressful on its economy.

Shanghai may be ready to ease its COVID restrictions, but growing cases in Beijing are making residents there nervous. North Korea said six have died and thousands have contracted an unexplained fever after the country went public with its COVID outbreak.

The markets

Uncredited

shares DJIA,
+0.85%

SPX,
+1.64%

comp,
+2.84%
are higher, along with TMUBMUSD10Y bond yields,
2.932%

TMUBMUSD02Y,
2.611%,
like the dollar DXY,
+0.00%
flattens out. oil prices CL00,
+2.06%

BRN00,
+1.89%
are higher and cryptocurrency sales have slowed, with Bitcoin BTCUSD,
+7.61%
back above $30,000 and tense stablecoin TerraUSD USTUSD,
-76.69%,
also slightly up.

Read: Why does UST, LUNA crash? Collapse of a once $40 billion cryptocurrency explained

And: Here’s how much money you would have lost if you bought crypto during Matt Damon’s Fortune Favors the Brave commercial

The tickers

These were the most searched tickers on MarketWatch as of 6 a.m. Eastern Time:

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