E Recovery Friday

One of my habits, when markets move heavily, is to try to decide whether or not to exit. Usually, I don't because markets correct from gains by losses, and from drops by rises. I learned this from fund manager Howard Marks's book Mastering the Market Cycle published in 2018, and The Most Important Thing published in 2011. While he is repetitious and verbose, I think it is important to have a guru who covers recent developments.

Yet for my Global-Investing.com outlook, there is something seriously wrong with Mr. Marks. He tends to consider foreign securities as an oddball way for US fund managers (like him) to protect against US share price drops or rises. Anyway, after the sell-off yesterday reversed more or less at the opening, I don't need a guru to tell me to stay the course. But since this is the second selloff in recent weeks, I know that there is a downtrend coming. US earnings figures will start coming out next week.

Photo by Annie Spratt on Unsplash

The big winners this week were Financials, clear winners from rising US interest rates. The 10 yr US T-bond opened at a yield of 1.34% Friday whereas it opened at 1.23% and closed at 1.29% Thursday. Higher interest boosts financials like American ExpressState Street, and banks. The US was not alone in raising rates. The People's Bank of China did this too. This was bullish for Taiwan and bearish for South Korea. The FTSE London index, heavily weighted with financials, reversed upward despite meh GDP figures and a slow UK recovery. The US opened up 400 points, wiping out the Thursday drop.

Our best performer, not too surprisingly was a European bank which opened up 5%, in part because it has lots of business in the USA. Another European is up 6%!

More follows:

Financials

*The ADR bank winner was Banco Santander, a big US player thanks to its heavy investment in Boston's Sovereign Bank which it bought outright in early 2009. The jump in Madrid did not carry over here where SAN is up only 3.2%.

*Lazard opened up 1.2% at $46.07 but also fell back. It is now $45.75. LAZ.

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William K. 2 months ago Member's comment

Interesting and educational! And all one needs to do to understand about dips and small spikes is to look at the graphs and observe the "noise" atop the signal. This tells me that one will need very fast response time to make a profit based on that. And it seems that the noise is intrinsic to the process, rather much in agreement with your assertion that it all self adjusts. It is indeed hard to see the big picture through a microscope.