Monday, November 16, 2015

Equity market resiliance

There are those in the know who say that more than 80% of hedge funds are down for the year.  The market itself stays volatile as today and Friday indicate with their offsetting moves, but overall the major indexes keep stubbornly moving around being flat for the year.  So it is surprising that so many hedge funds and in fact some mutual funds are down around 2% or more, some much more, for the year.

It seems as if the market could be moving towards some major directional shift, one of those that leave everyone watching and knowing that the market is not tradable for a day or two.  That's a worry for tomorrow and is always out there.

Certainly this year's market overall has been led by a few powerfully popular and successful companies like Google, Amazon, Netflix, and Apple, as many pundits like to point out, and to an important extent by many many more than a handful of large corporate stalwarts with strong balance sheets and attractive dividends, as few pundits care to mention.  It has been a narrow market of success overall but there has been success.  This lack of breadth is a concern.

One area that has become perilous is the small cap area, where trying to find bargains now just feels dangerous and, as a beneficiary of this sector in the past, here it can said from experience that the few tries in 2015 have not been home runs, or singles.  Exogenous event risk now seems high but the all knowing market chose to ignore that today.  No predictions here, but building liquidity for tax season and unexpected events seems wise, while staying in healthy large corporations should anchor a portfolio.

Mainly just watching here.


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