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TPW Advisory Friday Musings: Brain Melt = Opportunity

09/07/2021
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Bolsas Internacionais Estratégia Global Macro Internacional

Maybe it was the long 4th of July weekend (all that socializing after 18 months without) or the strong 1st H of the year (record for US financials, Energy, near 25 year best for EU banks) or the weather (I was rained on 5 days in a row personally) but whatever the cause there seems to be a collective brain melt going on in global financial markets.

 

Maybe it’s the Dueling Dualities as investors toggle between bull case and bear  between inflation fears and slow growth concerns, between the Delta variant spread and the vaccine production surge (my bet for most important tactical issue).

 

It is a confusing period with little in the way of recent history to guide investors; a sub 1% drop in the S&P after a record run of day after day ATHs sparks media hyperventilating about down markets and what it signals for the global economy. After such a run an S&P pullback is healthy.

For all the hype most financial assets have been range trading for months; it’s the rotations underneath that have been tricky. After a great 1H run for Value and Cyclicals as rates rose and bonds sold off the reverse has happened over the past few weeks – now that move is extended.

 

Range trading reflects investor confusion about peak growth vs global expansion, Fed tapering vs a Fed unable to raise rates, Delta Variant vs synchronized global expansion etc. If Fed taper was really the fear then all this slowdown talk should alleviate it right? Somehow it doesn’t feel that way. Credit is trading fine while Defensive equity sectors are not seeing any big bid. Just another “pothole”….

 

Here’s the TPWA 3 step approach: Step One – Keep Calm and Carry On. Or as Bob Marley sang  “So when you’re riding through the ruts don’t complicate your mind”. Step Two – recognize what’s happening. Step Three – take advantage of the opportunity.

 

Jay Pelosky

Jay Pelosky
Estrategista Global - TPW Advisory
Nova York, EUA

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