Thursday, October 28, 2021

Morning Note: "The Greatest Way to Optimize"

So, US GDP for the 3rd quarter came in at 2.0%, thanks to a build in inventories. Were it not for inventories, growth would've been nada. 

Against a backdrop where inflation has to, at best, keep the Fed from further opening the taps, well... let's just say that rising inflation and a slowing economy does not an ideal macro setup make. Of course there is a spending package waiting in the wings, however, that has the powers-that-be crossing their fingers. But, then again, there's inflation -- and a severely hamstrung Fed...

As for the all-important consumption activity captured in the GDP calculation, personal spending didn't disappoint; rising 1.6% -- all, by the way, driven by spending on services (not goods). As for capex spending, again, GDP's up only due to inventories, so spending (lack thereof) on business expansion was a drag.

We'll keep this note short; a week's worth of highlights will follow a little later this morning.

Asian equities struggled overnight, with all but 1 of the 16 markets we track closing lower (although our Asia-Pac exposure is up this morning, along with the regions equity futures).

Europe's, on balance, off this morning, with 11 of the 19 bourses we follow in the red, as I type.

US major averages are bouncing off of yesterday's late-day selloff: Dow up 173 points (0.49%), SP500 up 0.65%, SP500 Equal Weight up 0.73%, Nasdaq 100 up 0.66%, Nasdaq Comp up 0.81%, Russell 2000 up 1.37%.

The VIX sits at 16.58, down 2.36%.

Oil futures are down 0.59%, gold's up 0.32%, silver's up 0.45%, copper futures are up 0.85% and the ag complex is up 0.62%.

The 10-year treasury is down (yield up) and the dollar is down a big 0.43%.

Led by MP (rare earth miner), ALB (lithium miner), solar stocks, semiconductor stocks, base metals futures and Nokia -- but dragged by KRBN (carbon credits), Indian equities, TIP, emerging market equities and energy stocks -- our core portfolio is up 0.50% to start the day.

More Howard Marx wisdom that resonates with us:

"In my view, the greatest way to optimize the positioning of a portfolio at a given point in time is through deciding what balance it should strike between aggressiveness and defensiveness. And I believe the aggressiveness/defensiveness balance should be adjusted over time in response to changes in the state of the investment environment and where a number of elements stand in their cycles."

Have a great day!

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