We have bounced, but it wasn’t easy. Lots of moving parts. Momo was still absent from much of the day, only ramping into the closing hours. I managed my book frantically, in and out several times, and closed near session highs of 1.75%. My quant was +250bps and YOLO +330bps.
My sense, the trend of value will continue, also commodities. Being long banks, old man stocks and some oil/ag makes sense on a longer term basis. I also do believe the inflation data is in fact TRANSITORY and will dissipate inside of 6 months. Think about it. Nothing has changed other than stimulus checks. That cannot last forever and once it is gone — inflation goes with it.
Long term, betting on lower rates via TLT makes sense to me. But in the meantime the perception of inflation persists, so you can play stocks like OXY, X or MOS until the trend ends.
Old man stocks like CHD, PG, KHC and CL have done well, but will not do well once markets regain its mojo. Also, if rates continue to go up, the risk reward for 3% divvy payers is gone. Perhaps smart money is already betting on lower rates and that’s why we are seeing value stocks run. But I doubt the market is thinking that far ahead.
For next week, I suspect value to continue to outshine; but there’s also a chance the true reflex bounce for momo stocks might happen and soon. I am talking about 20% runs in a day and it’s coming. See CPNG and WISH as two examples of what awaits.
But after the bounce, fade it twice. The tech run is over for 2021 and cannot return unless something materially great happens to the economy.Comments »