The equities market continued its bad-news-is-good-news rally last week and gave hope to the longs that the bottom might be in. Yeah, not so fast. Although the recent strong move to the upside felt good (really good), the underlying fact remains – the U.S. economy is starting to roll over. If you need proof, just look at, well, everything. Most earnings reports have been less than impressive and offer little to be excited about in the near term. The economic calendar is also riddled with weakening indicators. The good news is that this feels constructive – the Fed may start slowing rate hikes and maybe we’ll get the recession behind us sooner than anticipated. Meh – who knows.
I’m still largely in cash, but did put some cash to work. Last week’s position adjustments:
- Sold 90% of my short-side hedges (mainly in SQQQ)
- Moved some cash to VOO
- Added DECK on pullback – One of the few apparel stories I like.
- Took profits in ENPH
- Added more BMY
- Added more AMT
- Started small position in LNG – chart is a little extended here, but taking a winter demand position
- Moved some of my 401k cash positions into long-side funds
Portfolio -3.6% YTD
This week will offer more earnings reports and a handful of economic data points. The Fed Interest Rate decision is on Wednesday (that’ll be huge) along with Payrolls, Unemployment, Job Openings, and PMI. The street is expecting all of these numbers to support the transition to a weaker economy and that’s not a bad thing. My gut is that we’ll have another week, or so, of long-side equities strenght, but will finish the year off flat, or down. Until unemployment ticks up and inflation is contained, there is no reason to believe that the trend isn’t ultimately negative.
No need to get greedy here. Tight stops are set and pockets are still full of cash.
Trade ’em well.
