As promised, clients, I'll be communicating more frequently as things continue to unfold... We know that times like these can bring angst and, as you long-time clients (we managed through Covid, the 2008 crisis, and the early 2000s tech bubble burst with many of you) have experienced over the years, when times are most uncertain is when we feel that you should be all-the-more hearing from us.
Global markets this evening are responding to what appears to be meaningful escalation in the Iran conflict... Oil is up over 8% as I type, while US equity futures are down over 1%... Asian equities are pretty much experiencing the same -- more-so Japan, less-so China -- as are European equity futures.
This morning we exited the remainder of our emerging market bond position (held in portfolios above 100k), and added the proceeds to our cash (short-term treasury mmkt fund) allocation... Our original thesis -- EM high relative yields, rate-cut prospects/optionality, and our structurally weak dollar view -- is essentially being challenged under present geopolitical conditions... I.e., we presently see more downside risk in that space than we do upside potential.
In terms of our overall positioning, we're actively testing it against three distinct scenarios -- contained conflict, protracted conflict, and stagflation -- and conclude that our now-higher cash position gives more room to act decisively as we gain clarity over the coming days and weeks/months.
Tonight's signals support our cautious bent right here... Rising treasury yields, alongside rising oil prices and flat gold suggests that the market is for the moment more focused on the risk of rising/persistent inflation, as opposed to seeking refuge in traditional safe havens... This is an important distinction that we are monitoring closely.
Just a reminder, I'll be away from the office this Friday the 13th, back on Monday the 23rd... But will definitely reach out herein with updates while I'm away.
Have a nice evening, and thanks so much for reading.
Marty
Have a nice trip!!
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