Is this a "Flight to Quality" or "Risk Off?" - Real Time Insight


Even though we had pretty good earnings news from the likes of Facebook ( FB ), Microsoft ( MSFT ), and Apple ( AAPL ) over the course of the last few days, we still had a rough day today. What gives Mr. Market?

Tech got especially hit today with the NASDAQ shedding over 1.5%. The big high fliers of yesteryear caught a slap down as well. FB down 4.5%, AMZN down over 9%, TSLA down over 3.5%. I don't think our tech sector is really that impacted by further sanctions on the Russians, which was really the only news on the day.

Yet today was another example of tech, so called "glamour stocks" and the small caps dragging down the rest of the market. You can call this a flight to quality trade, but in the grand scheme of things it could be the beginning of a boader risk off type trade. I classify a true risk off trade as investors rushing to the 10 Year, cash, and globally to the US Dollar and the Japanese Yen. That's the trade we saw during our meltdown in 2008.

If this move is a flight to quality, who knows how much shaking out it's going to take. All the window dressing that fund managers put up towards the end of last year is being taken down right now. Fund managers rushed to put the glamor stocks on their books so they could say "I owned TSLA in 2013." Now it seems to me like they are shedding their holdings in these stocks, temporarily sitting in cash while the weak hands sell across the board and make the quality names that much cheaper.

While we're all screaming "Sell in May and Go Away!" they'll be scooping up deals off the bottom.

So my question is…

Is this a "Flight to Quality" or "Risk off?"

To clarify, a flight to quality would mean still own equities, just not volatile stocks. Think choosing utilities over biotech, but still buying stocks.

Risk-off would mean trim your equity exposure overall and add to your US Government bonds and cash.

My vote is the is a "Flight to Quality" and further, this is setting up another great opportunity to go back into the high fliers in the near future.

Chime in below and let me know what your thoughts are on this market.

APPLE INC (AAPL): Free Stock Analysis Report

FACEBOOK INC-A (FB): Free Stock Analysis Report

MICROSOFT CORP (MSFT): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Stocks

Referenced Stocks: AAPL , FB , MSFT

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