Navigating Market Turbulence: The SP500 Slide and Macro Complexities
August 28 2023 Update
The SP500 is about -5% from its last peak in late July. However, a lot of damage has been inflicted beneath the surface, particularly on stocks highly sensitive to changes in interest rates.
Below is the 10-Year Treasury bond that has been ascending since late May due to expectations that the Federal Reserve's hiking cycle isn't over yet.
The latest Consumer Price Index (CPI) report witnessed a minor inflation uptick, and the projected number for August is again indicating an upward trend.
The overall economy is emitting signals of strength, which isn't good news for rates and inflation.
It's a very intricate economic backdrop that has perplexed economists and investors worldwide. Initially, they were predicting a recession in 2023, but now most are in the "no recession" camp.
August through September tends to be unfavorable or less favorable months for the stock market. Thus, adopting a defensive stance is the wisest course at the moment, while awaiting more clarity on inflation, the economy, and rates in the coming months.
The equal weight SP500 shows a clear failed breakout above, Will the 40-week moving average hold?
My POTS (Portfolios)
I am maintaining a passive stance this week, observing the unfolding events.
LARGE CAP MOMENTUM POT (link)
I am left with one position only and the POT sits at -6% since inception this year.
SMALL CAP MOMENTUM POT
Here I am left with 2 positions for an overall -2.6% since inception earlier this year.
I will be sharing my insights into trading momentum gained this year in the upcoming weeks.
That's all for this week. Wishing you all the best!
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Important: this is not investment advice. Consult a licensed financial advisor before making any investment decision.