I know I owe you all part two in the series on the debt crisis but in the past weeks we had a death in our bank family and things have been chaotic. I will get to it – maybe even next week – but I wanted to give you an update on what is happening in our clients’ portfolios.
We have been riding the bullish tide higher along with the market – and out-performing the market as we do – but eventually something will derail this move. Given that we are pretty long in the tooth and near all-time highs, I decided to take some equity exposure off the table.
That means for clients with a mixed stock and bond portfolio, I reduced any stock market exposure that was above target due to growth of the portfolio and reallocated that to the bond part of the portfolio.
For clients with a stock-only portfolio, I raised some cash so that if we get the pullback, we will have liquidity to capitalize upon lower prices.
So why did I choose now for the timing? I was concerned about today’s jobs report and that it might be hotter than anticipated. It did, in fact, come in well above expectations (285,000 new jobs were added to the economy opposed to the 172,000 expected). The market initially sold off, but is now slightly positive on the day.
What really will move the market is next week’s speech by Federal Reserve Chairman Powel. If he hints that the much-anticipated July rate cut will be pushed further into the future due to the economy being stronger than anticipated and that it could keep inflation higher for longer, the market will very likely sell-off and give a chance to add new positions or add to current ones.
As such, I sold the stocks that had either gotten way ahead of themselves – like booking some outsized Nvidia gains – or closing positions in those companies that haven’t performed well during this bullish move up due to earnings or growth issues – both groups are particularly vulnerable to downside moves in stock prices if we get a pull back.Â
Clients will see these trades all settle in coming days – the stock sales first (some have already settled) and any fixed income purchases between now and June 21st.
If you have any questions, always feel free to contact me.
Thanks for reading!
–Mark
