Market Risk Elevated Heading Into Distribution Season

Furthermore, when everyone is long equities and leveraged, it is an unexpected, exogenous event, which begins the rush for the exit.

Such is why you don’t wait for it to start raining to “build the ark.”

Portfolio Positioning Update

The idea of “building the ark” has continued to be our motto over the past week in our portfolios. Specifically, our primary focus is to adjust our allocations, capture profits, and protect capital when the “risk/reward” profile becomes unbalanced.

Therefore, given the ongoing extremes of the market, as discussed above, the imbalances suggest a more cautious approach to portfolios currently. As such, we continued reducing our equity exposure, adjusting our bond holdings, and raising our cash levels.

Earlier, I discussed in our “3-Minutes” video, the risk of selling pressure after the holiday as pension fund and institutional managers rebalance and mutual funds distribute capital gains.

As shown below, with fund managers carrying some of the lowest cash balances on record, we could see selling pressure to make distributions. 

With the markets exceedingly exuberant on many fronts, caution is certainly warranted. With margin debt near peaks, stock prices at all-time highs, and junk bond yields near record lows, the bullish media continues to suggest there is no reason for concern.

Of course, such should not be a surprise. 

At market peaks – “everyone’s in the pool.”

“The investor’s chief problem – and even his worst enemy – is likely to be himself.” – Benjamin Graham

 

7 Impossible Trading Rules To Follow

In the heat of the moment it is easy to get swept up into narratives as the “Fear Of Missing Out” overtakes our logical thought processes. As such, here are the 7 impossible trading rules to follow:

1) Sell Losers ShortLet Winners Run:

It seems like a simple thing to do, but the average investor sells their winners and keeps their losers, hoping they will eventually return to even.

View single page >> |

Disclaimer: Click here to read the full disclaimer. 

How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.