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10/15/2014 0 Comments

Recent Market Turmoil And Portfolio Positioning

Markets have seen another volatile trading day, with markets having a quick jolt in the morning followed by further losses in the afternoon only to come back some 1.2% intraday to end the day down 0.80% on the S&P and less on the Nasdaq. This makes one wonder how much of this is a much needed correction or a more sustained sell off like we have seen in the past after stimulus was taken off and growth prospects taken down. Commodities have also been hit in the recent downturn, specifically energy. There are a lot of factors to be afraid of globally, but looking past the daily tape their are some potential areas of interest to me. For starters I have not been long this market and am still somewhat neutral at this point, but as time goes on I am increasing beta to key segments in the market. I have started positions in energy stocks much to my own internal debating, but in my current thinking it makes some sense. Overall i am short equities with a focus on Japan, and playing decreasing yields. With markets looking at slowing growth in China and poor data coming out of Europe, specifically Germany where much of the regions growth is concentrated,  I started to look for catalysts that could change this trend, and thus challenge my current views. This led me to the possibility of China adding more stimulus and the Fed perhaps pulling back on some of the bullish expectations in terms of rates. This would be a plus for commodities if China started to add stimulus (the same with Europe, though I think outright purchases will continue to face challenges) and I also went long the pound and some emerging market currencies to the dollar as well to play a talking down of rate expectations in the US.
While it is too early to tell if this will be the case or if these positions will come to fruition, I will keep on the negative bias positions until I see more confirmation on the stimulative front.
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