Even though we had pretty good earnings news from the likes of
), Microsoft (
), and Apple (
) 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
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