It is hard to believe we just completed five full years since the start of a global pandemic that created massive disruption, loss of lives and livelihoods, and in some cases divided a country because of decisions taken in the fog of war. In some small ways, what is happening this March feels like déjà vu, at least as far as markets are concerned. This time around the turmoil is related to tariffs and a trade war instead of war on a coronavirus but we aren’t yet seeing shocks to the economy like we did in early 2020 where initial unemployment claims were almost off the charts.
Just like we saw in March 2020, markets are dropping sharply due to significant uncertainty about how the future will unfold and we saw the S&P 500 pull back 5.30% in the first two weeks of March, while the Nasdaq dropped 5.80% despite what appears to be a relief rally last Friday. The InsideArbitrage model portfolio was not spared from this carnage but the drop was a more modest 1.86% because we increased our cash position at the start of March, have a short position in a momentum stock and our healthcare stocks (Vertex Pharmaceuticals, Avadel Pharmaceuticals and Ardelyx) managed to buck the trend.
We are also seeing insiders step up their purchasing and we reported on insider buying in nearly 150 companies during the course of this week in our daily event driven monitors. What we have not seen yet is insider buying exceed insider selling like we saw for the first time in a decade in March 2020. Insiders are also often early and the vast majority of the 150 companies I looked at this week (the quantitative IA Score that we developed helps create a quick filter) didn’t stand out as screaming buys.