Friday, February 28, 2020

Morning Notes

Sharing some morning notes:

Future Fed Chair hopeful Kevin Warsh said before the market opened to expect globally-coordinated central bank action if this keeps up. Equity futures quickly retraced half of their pre-market losses.

Shortly after the open Fed governor Bullard said that a rate cut is only on the table in the event of global pandemic. Equities quickly plunged to new lows on the morning.

Reality: A fed rate cut will likely serve as a psychological boost to equities. However, with no other catalyst, such a rally could easily fail and the market plumbs new lows.

Interesting action this morning: At the moment, defensive sectors are getting sold harder than the broader market. Utilities, staples, REITs and health care are off 3.5 to 4% while the S&P 500 is off 2.6%. Gold is also trading lower at the moment, down 3.23%.

Clearly we're seeing a full-on distribution/liquidation morning. Defensives are taking more of a hit because they've been the recent winners. When the dust settles we should expect sectors to fall back in line (on a relative return basis) with macro conditions.

Only two core positions (plus the put) up this morning: FXY (Japanese Yen) and SJB (inverse junk bonds), our developed Europe, while down of course, is outperforming U.S. at the moment. The Euro and Pound ETFs are only down 0.20% and 0.62% respectively. 

Overall, our fully allocated core portfolio is off 1.52% as I type, the S&P is off 2.62%.

Readers keep in mind, the above %s are there only as I type. By the time you get this they may have moved notably in either direction...

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