At a family office, we are concerned about the entire financial picture for each family trusting us with advising them. While cash flow and liquidity have been topping our list during the 2019 price increase across all U.S. stock indexes, we are constantly going back to our assumptions to identify which ones were not correct and then adapting.

I am not convinced anyone knows what this level of unemployment will mean for our future. I am equally unconvinced that anyone knows what this level of federal government spending will yield. What are the unintended consequences? We choose to deal in facts, as good as we know them today. If tomorrow changes, we will adapt.

Most major U.S. equity indexes are beginning to show additional signs of stress, and I believe it is important to think about cash flow, liquidity, and each family’s assumptions. Ready, shoot … aim? That never has a good outcome. There are always sign posts that we look back at with the Great Recession (2007-2009) or the Tech Wreck (2000-2003) — perfectly identifying when we should have known what. It is more difficult to do that in real time.

While there is no perfect sign post each time, there is generally a preponderance of evidence that leads each family to align its priorities to the current market context. One such signpost is to know when the 50-day moving average moves below the 200-day moving average. Consider the history with this signpost, and think critically about your entire financial picture and what assumptions you have made.

50-Day Crosses the 200-Day Moving Average

As equity markets continue to seek footing moving averages continue to roll over, as the S&P 500 SPX underwent the “Death Cross” Monday, March 30, 2020 when its 50-day moving average fell below its 200-day moving average. The last time the S&P 500 saw its 50-day drop below its 200-day was December 7th of 2018, later to experience the “Golden Cross” (50-day moving average going above 200-day moving average) on April 1 of 2019. Perhaps a way to rationalize this “delayed” cross, especially after rebounding the past few days is: the old bull market highs continue to drop off the rolling calculations, allowing the more recent days of lower readings to take greater mathematical effect on the moving average calculations. Remember that we were at all-time highs just 30 trading days ago!

While the terminology may sound ominous the death cross is not that uncommon, especially when compared to the recent historic movements we’ve seen in the market. The table below gives an overview of historic crosses and respective drawdowns. The drawdown column uses the closing value of the death cross initiation date for SPX and subtracts the lowest closing value for SPX over the timeframe until the 50-day moved back above the 200-day. Note a few instances where the drawdown is zero, meaning the death cross date was the lowest close during the timeframe. When aggregating the data from 1929 – 2019, we note an average drawdown of -12.57%, median of -7.75%, and maximum of -78.84% (1930s). If only looking at data from 1950 onward, we note an average drawdown of -10.37%, median of -5.38%, and maximum of -53.44% (2008).


The S&P 500 now joins the Dow Jones Industrial Average DIJA, which underwent the death cross at the beginning the week of March 23, 2020. That said, the Nasdaq Composite NASD remains the lone domestic equity index of the major trio with its 50-day moving average above its 200-day moving average, however, NASD’s 50-day moving average is nearing its 200-day.

To create a disciplined approach to your asset management, schedule an appointment with Pulliam Family Office — and to learn more about Nasdaq Dorsey Wright, click here.

The attached research DJIA research report was prepared and published by a third party, and is being provided to you by Raymond James Financial Services, Inc. solely for informative purposes. Any person receiving this report from Raymond James Financial Services Inc. and/or its affiliates should direct all questions and requests for additional information to their financial advisors and may not contact any analyst or representative of the third-party research provider. Neither Raymond James Financial Services, Inc. nor any third-party research provider is responsible for any action or inaction you may take as a result of reviewing this report or for the consequences of said action or inaction.

Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Past performance is not a guarantee of future results.

The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. 

The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market.

The NASDAQ-100 (^NDX) is a stock market index made up of 103 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ. It is a modified capitalization-weighted index. … It is based on exchange, and it is not an index of U.S.-based companies.

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