Market Strategist Jeff Saut: Be Conservative, Not Conventional ~ market folly

Tuesday, April 17, 2012

Market Strategist Jeff Saut: Be Conservative, Not Conventional

Market strategist Jeff Saut is out with his weekly investment strategy entitled, 'Be Conservative, Not Conventional.' In it, he summons advice from Benjamin Graham, telling investors to focus on risk rather than returns.

He also quotes Ken Fisher from 1989, who offered prudent investing advice (emphasis ours):

"The two most definitive studies ever on long-term returns, the Ibbotson/Sinquefield and Fisher/Lorie studies, both point to average annual returns for stocks of 9% plus per year going back to the mid-1920s. So 15% to 20% per year is really 66% to 100% better than the market as a whole. That's tough but doable. Consistency is the key.

It's the math. A single year that is down 30% means you have to get 30% per year positive returns for the next four years to get back on track for a 15% annual average. Or, if you score 20% annually for four years, and then suffer a 30% decline, your five-year average return is only 7%."

With this quotation and the recent market decline, it's quite obvious that Saut is trying to get investors focus on the 'risk' aspect of the equation, rather than the oft-lusted 'reward' side.

Saut also mentions technical analysis and levels on the S&P 500 he is watching. While he saw minor support around 1360-65, his hunch was a break below 1375 brings into play the 1320-1340 level as next support (the market currently trades around 1370).

He believes that this, coupled with a break below the 50-day moving average, warrants a cautious approach. The strategist points to shares of Apple (AAPL) as a tell. It's often thought that market leaders such as AAPL are the last to fall in declines... and AAPL has done just that recently.

Embedded below is Jeff Saut's full market commentary:

You can download a .pdf copy here.

To read additional thoughts from Saut on the market decline, see his missive: waiting for a fatter pitch.

For more from this strategist, head to his thoughts on currency dilution causing money to flow into all assets.

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