Now that Ben Bernanke has retired from the U.S. Federal Reserve and Janet Yellen is running the show, the glass is definitely half-empty and the punch bowl is leaking. A sudden global sell off in stocks in early 2014, has many investors wondering if this is “just” a correction or something worse.
The Fed tapering program is well underway and has reduced its monthly bond purchases by $20 billion since December. On top of that, some emerging markets (Argentina, Turkey, S. Africa, and China) are experience slower growth and market instability.
In my opinion, there is positive momentum for biotech, real estate, bonds, utilities, and the U.S. dollar. All style boxes have negative momentum with growth beating value. Utilities and gold are the only positive momentum sectors. The markets of Germany, U.S., England, and emerging markets all have negative momentum. A lot of money, on a global basis, has quickly gone into bonds.
Notwithstanding the recent sharp selloff, I remain bullish on S&P 500 (SPX), NASDAQ, and gold indexes. We remain short bonds at this time. This is partly due to the sudden equity drop and partly because the U.S. growth rate increased to 3.2% year in Q4 of 2013 compared to 1.9% for 2013. The lessening of bond stimulus should have increased bond yields, but they have declined in an apparent “flight to quality.” In my opinion, I think the worries about the emerging market slowdown will diminish over the next several days as short sellers run out of cash.
DISCLAIMER: Certain information contained in this presentation is based upon forward-looking statements, information and opinions, including descriptions of anticipated market changes and expectations of future activity. The manager believes that such statements, information and opinions are based upon reasonable estimates and assumptions. However, forward-looking statements, information and opinions are inherently uncertain and actual events or results may differ materially from those reflected in the forward-looking statements. Therefore, undue reliance should not be placed on such forward-looking statements, information and opinions. Past performance is no guarantee of future results.
