Increased volatility in individual stocks continues to be the theme in the third quarter. Despite storm clouds hovering, the market has vaulted higher. FOMO (fear of missing out), cash on the sidelines, problems in markets outside the US and algorithmic trading have tested even the most patient investors. We continue to be patient, not willing to chase shiny objects. Cash doesn’t burn holes in our pockets, as cash is keeping pace with inflation and outperforming bonds.
- Concentration of S&P returns. As of September 5th, the FAANMG stocks (Facebook, Apple, Amazon, Netflix, Microsoft, Google) contributed >51% of the S&P 500 return.
- Moves of over 10% in a stock on a single day. Moves that in the past took months or years.
- Political uncertainty. The Mueller investigation, mid-term elections and trade wars to name a few.
- Rising interest rates. The Fed has raised rates 3 times and has signaled at least 1 more this year.
- Potential inflation. Rising interest rates, tight labor markets, trade wars and any $ weakness are all inflationary.
- Increased risk of corporate bond defaults in the next downturn. Half of investment grade companies are rated BBB, one level above junk, making future downgrades quite disruptive to the junk bond market.
- Stay very short term on fixed income investments.
- Maintain high cash levels.
- Add specific names/funds on weakness and sell on rallies.
- Reallocate as things change.
- Increase exposure to late cycle industries (energy) and uncorrelated assets (gold).
We remain focused on the long term, guiding your portfolio to meet your goals with an eye on approaching inclement weather. Please call us with any questions, we are here to help.
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2x Wealth Group is a team at Ingalls & Snyder, LLC., 1325 Avenue of the Americas, New York, NY 10019-6066. (212) 269-7757
