Market Notebook

by | Oct 10, 2021

Discussion – 

Both equities and bonds experienced a bout of volatility during the last week.

As measured by the ticker SPY, Equities painted a new recent low on the 4th and then recovered nicely into the end of the week. Unfortunately, the Friday close was just below the 20-day exponential moving average, and it is not clear if the SPY is set to move higher or whether it is likely to break down further from this point.

Bonds broke lower out of recent range-bound trading, suggesting market participants are concerned about inflationary pressures and more confident that the Federal Reserve will indeed be moving forward with bond purchase tapering. Although bonds moved sharply lower, the moves were orderly and not indicative of fear-based trading. The break lower out of consolidation is suggestive of a trend move lower. Unless bond rebalancing is necessary, it may be wise to hold off on purchases until the downward trend resolves.

The resiliency of certain crypto assets, including Bitcoin, was on full display last week. For portfolios without crypto exposure, it may be worth considering the addition of some long-term crypto investments as a diversifying asset class. Given the volatile nature of most crypto assets, consider that limiting position size may be the best way to minimize overall portfolio risk to sharp moves in crypto.

All the best in the week ahead.

Cory Haupt