At the end of January and beginning of February, investors were risk averse in many markets. World equity markets were in turmoil over Argentina and Turkey sovereign debt and China’s economic slowdown.
These worries resulted in a sudden worldwide equity sell off and increased market volatility. Active managers sold equities and bought U.S. bonds, increasing bond prices as equities moved lower.
Market conditions are changing very quickly. While I don’t have any quantitative data on this, I sense managers are actively managing risk and changing equity and bond allocations on a time frame of less than a week.
In this market environment, I like sectors such as biotech, real estate, precious metals, and utilities. All style boxes have positive momentum with growth beating value. At the time of this writing, I believe the markets of Germany, U.S., England, and emerging markets all have positive momentum.
I remain short bonds at this time. I don’t see a recession or bear market in 2014.
DISCLAIMER: The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable. Past performance is no guarantee of future results.