Market Briefing For Friday, Apr. 30

Positioning for decline seems to be the increasing bias of most managers.  At the same time, some indicators continue to suggest risk is to the upside not to the downside. It's hard to embrace that perspective; while at the same time for sure this market doesn't accommodate those expecting an S&P thrashing.

I mention this as the essence remains a market that 'already' corrected within primarily the smaller-cap sectors, but widely for stocks outside of the handful of leaders, as we have often noted. The point is that while a cursory glance at the S&P clearly says 'this should be done'; a more in-depth look at sectors or individual stocks suggests it's more ambivalent than taking a tough stand.

So I tend to call this a 'Summer Market'. Some are up and some are down. It's actually fairly balanced and while S&P shakeout risk persists of course; there is not a set-up for an all-encompassing plunge like some have in mind. Surely, of course, there's always risk of some exogenous event becoming a catalyst, that indeed breaks the market dramatically; but aside that this remains totally dependent on liquidity, the continuity of Fed policy (expected for now; though I wouldn't be surprised if they touch on a 'tapering topic' at the next FOMC); as well as the promise (insanely expensive as it is) of further fiscal stimulus.

As to disruptive catalysts, few if any stand out like China's threat against what is the democratic island (the 'other' China if one really looks at history) Taiwan or even the threat against the smaller islands within artillery range for China.

Besides the obvious debacle of an actual war; Taiwan is something else (I've been there once, not just Taipei but also Kaohsiung, the shipbuilding center, as well as the free trade zone). Taiwan is the 'world's heart' for sophisticated semiconductor manufacture; since so much has been contracted to TSMC or others; from everyone ranging from ARMS, to Apple to others. Even the Ford comment about how a shortage interfered with manufacturing and thus sales, in the preceding and present Quarters, denotes how important Taiwan is.

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