A Few Quick Thoughts

I'm breaking in with a few quick thoughts on the market's these past few days.  As I'm doing this more as a reaction to the past few days there's not going to be a lot of detail backing up these comments.  I'll try to put more color on some of these ideas next week.  Also since these are more or less initial reactions to what's transpired, I reserve the right to change my mind in the next few days.  

Markets are currently trading higher this morning.  I would't be surprised if these gains are erased by the end of the day.  Too much uncertainty going into the weekend.  I also wouldn't be surprised if Monday was also a bad day.  Then I think markets will try to rally going into the end of the quarter.  Remember that's just a guess based on a lot of years watching days like these and not any sort of recommendation.  I could be totally wrong on this so don't make trades based on what you read here.  If you do you're on your own.

Markets have sold off ostensibly because the Federal Reserve reaffirmed what they've been saying for a month or so that they could start to taper bond purchases sometime next year as economic conditions permit.  First, they said nothing new the other day.  Markets have started pricing this in since mid-May. 2nd, the part that most people seem to be missing here is the part about those economic conditions.  I'm in hedge fund manager David Tepper's camp which is that stronger economic growth should be good for stocks.  3rd, I don't believe that the current back up in rates is enough to derail economic growth.  I DO think that markets were overbought {especially by our work} and these most recent events have been used by market participants as an excuse to sell securities.

That being said, I'm beginning to wonder if we are seeing a sea change in market asset allocation starting to take place.  I'm wondering if some of the strategies we've seen that have worked in the past few years might not be those that work as well going forward.  In particular we've all been living in a interest rate bull market since the 1980's.  That is, we've been in a period where the long term trajectory of rates has been down.  It seems to me that we are in the long term reversal of that now.  I don't think rates are going back to where they were back then, but I'm beginning to think that we've turned the corner, especially if the economy starts to improve.

Most US market indices are still up close to double digits for the year.  Overseas markets are punk.  Most are negative for 2013.  However, significant technical damage has been done this week to the markets.  I will post on this for Monday.  I am also of a mind that those seasonal factors we've discussed this year may now come into play.

I'm beginning to feel about foreign markets like I did about US equities last year around this time.

Back on Monday.