Beta is a "relative" measure of volatility when measuring a stock or fund against a set market index, in this case the S&P 500. Whether the S&P 500 goes up 1%, 5% or 50% the S&P 500 has a constant Beta value of "1". So, "Beta" is a value assigned to a company based on how it performs over time compared to the S&P 500.

So, for example, if the price of Company A's stock - over a period of time - tends to go up by 2% each time the S&P goes up 1%, the Beta of Company A will be "2". Conversely, if the S&P 500 falls by 1%, Company A will decline by 2%. The higher a company's Beta value is, the more volatile the price deviations will be when compared to the S&P 500 percentile moves.

A company with a high beta value above "1" might describe a young promising but unproven company with high growth prospects. As the overall market goes up, it's value goes up by a multiple of the percentage move in the S&P 500.

Dow Theory was first conceived and developed at the end of the 19th Century by Charles Dow, who along with Edward Jones and Charles Bergstresser founded the Dow Jones Industrial Average in 1896. While Dow Theory was developed by Charles Dow, he was unable to complete his ideas around this as he died in 1902. it was later expanded upon by by William Hamilton in the 1920s, Robert Rhea in the 1930s, and E. George Shaefer and Richard Russell in the 1960s.

So what is Dow Theory? Dow Theory is a trading methodology that is based on the efficient market hypothesis. Charles Dow believed that the market was - in aggregate - a good indicator or measure of the the state of the economy or confidence in the economy. Therefore, if one could analyze the overall market, one could identify trends that could forecast the direction of the market and individual stocks.

Part of the analysis included an observation that markets experience three layers of trends. The primary layer or trend is that markets are either in a bull or a bear market. Within each of the latter primary trends there are secondary trends working against the primary trend such as pullbacks or rallies, but these occurr in the context of the primary trend which prevails while in motion. These secondary trends can last from 3 weeks to several months. Lastly there a tertiary trends which are minor and may last for a week or two or three and represent static noise.

With so much talk in the news of day traders and investors, we thought it would be useful to discuss whether the allure and excitement of short term trading outweighs the more boring strategy of long term investing. On the surface, day trading or short term trading appears to be a relatively easy way to make money. With Tesla and Apple and other tech stocks posting such enormous gains in a relatively short time frame, what is so complicated about doing that?

The reality is that timing the markets and individual stocks in the short term is very challenging for the professional traders with all the tools and technology at their disposal, which makes the odds of success even more stacked against non-professional short term traders. There are periods in time where short term trading strategies can work swimmingly but this this is not the case over the long term.

It is well documented that in general for the most part, buy and hold investors often outperform short term traders (after tax and other costs are factored in) by 6-7% per annum. There are always a small number of day or short -term trader success stories that are promoted by the media of course, but the reality is that over the long term most day or short term traders are not successful and eventually lose money.

The COVID induced recession has had a severe impact on the economy with the poorer segments of the population bearing the brunt of the impact. Millions have lost jobs or seen their income significantly reduced. While the Government stepped up with over $3 Trillion in stimulus and support to small and large businesses, extending and supplementing unemployment benefits, the supplemental benefits ended last month. States have also stepped up asking utility companies to put a morotorium on payments for those who have lost their jobs. These morotorium's are also expiring in many states.

More Stimulus is Inevitable

It is estimated by the NEADA that electric and gas debts will exceed $24.3 billion by the end of 2020. In Indiana, for example, it is estimated that over 110,000 households are behind on their utility bills by over 120 days. In Wisconsin 3 in 10 households are behind on their bills. This is just the tip of the iceberg. A percentage of the very same households are behind on rent or mortgage payments. The impact on the health, security and safety of families who are impacted by this is serious. Likewise these sums will have a significant impact on the utlity companies themselves.

As we head into another election cycle, can history provide is with any clues about how the market or rather the institutional money behaves?

Elections and their respective winning party policy outcomes inevitably have impact on businesses, taxation and the economy. The closer the race is, the more diverse the policies and the more unknown the outcome, the less certainty the markets or investors have.

It would be logical to assume in such instances that institutional money is going to de-risk and hedge their portfolios to some extent going into an election.