Market Notebook

by | Oct 17, 2021

Discussion – 

Equities performed well last week, closing above the 20-day exponential moving average as measured by the ticker SPY. Last week’s price action breaks the technical downward trend and sets up equities to possibly resume their upward trend.

The overall bond complex, as measured by ticker BND, recovered some ground last week. Unfortunately, price encountered resistance near the 20-day moving average and closed the week below the 20-day moving average. From a technical perspective, the bond complex remains in a downward trend with potential support at the $80.30 ish level should prices continue lower.

Inflation concerns and supply chain disruptions are two topics likely to be top of mind for market participants during the next few weeks. Talk of persistent inflation would likely weigh on bonds and perhaps equities moving into the fourth quarter. Talk of supply chain disruptions and their effects upon corporate profitability over the next several quarters could weigh on equities in the near term. Longer-term, companies are identifying the bottlenecks and are working hard to reduce or eliminate such disruptions. Near-term pessimism in equities could translate into long-term buying opportunities should a significant pullback in prices occur.

Regarding bonds, it seems prudent to rebalance portfolios to underweight bonds, given the possibility of sustained inflation concerns.

Bitcoin moved back towards recent highs last week as market participants and regulators continued their focus on crypto assets. It seems likely that additional regulation will eventually be coming to the crypto space in the U.S.  Additional regulation and oversight will likely further legitimize crypto assets and bolster their position as an alternative asset class. Additionally, the development and approval of regulated products that involve crypto assets look set to expand as U.S. regulators approve a Bitcoin futures ETF to begin trading in the coming week. Be advised that crypto-assets can be quite volatile, so position size accordingly to mitigate portfolio risk if holding crypto assets is desired.

All the best in the week ahead.