It’s been a good trading month. The strategies have been on target, buying the dip for most of the month while taking some nice shorts at the end of this week.
The biggest concern is yield curve inversion as the 30 Year Yield hit its all time lowest level yesterday.
The pullback at the end of the week seems relatively small compared to the surge in Gold and Bonds this week. There was quite a bit of divergence between risk assets such as Bonds and Gold versus risk on assets such as stocks. The mindset is one of greed where the market is chasing the best passive yield with no real regard for risk and the mindset that the Fed has your back.
Its complicated though, since the Fed doesn’t usually cut rates in an election year and the latest FOMC minutes show no signs of more Fed easing.
Coronavirus is still an unknown factor though. Some of the news has been that the coronavirus was developed as a bio weapon and that it “escaped” a Chinese lab. It is highly contagious before there are symptoms and with a two week incubation period, many can be infected and also spreading the virus before they know they have it.
In order to contain the virus, China, has shut down many operations. Is this virus contained? Or has it spread to the rest of the world?
The human toll is the first concern.
This can also affect the global economy and cause the market to re-price.
Warren Buffet is talking his book this weekend stating “its almost certain stocks will beat bonds over long term if rates, taxes stay low”.
In the short term market seems to be going through its “tantrum” phase now where it wants to pullback until the Fed and central banks provides more easing.
Like I said, it is complicated. All of this generates fluctuations in the market and offer us with short term trading opportunities for additional portfolio diversity to manage your assets.