Market Notebook

by | Aug 15, 2021

Discussion – 

Broader US equities as measured by the ticker SPY closed at record highs last week, while technology sector stocks as measured by the ticker XLK remained rangebound. This dynamic is not particularly surprising nor concerning.

As measured by the ticker BND, Bond prices managed to halt their pullback near the 50-day moving average and closed above the 20-day exponential moving average on Friday. From a technical perspective, Friday’s closing price in BND suggests bullishness for bond prices. However, given the current state of economic fundamentals, I am skeptical of the bullish technical implications for bonds. I’m still of the mindset that portfolio exposure to bonds should be minimized where possible, given the expectation of Fed tapering at some point over the next 12 months.

Regarding Chinese equities and specifically Chinese technology equities, recent actions by the Chinese government, including the absolute decimation of the Bitcoin mining industry in China, are great reminders that regulatory risk is significant and ever-present for Chinese companies. Use caution when evaluating opportunities in China. Those opportunities can quickly turn into problems with little warning.

In the cryptocurrency space, we’ve seen Bitcoin and Ethereum prices rebound sharply from recent lows. This, in the face of the Chinese crackdown and recent US legislation, suggests this space is resilient. If a Chinese crackdown and stricter US regulation can’t cause a rout, what could? As a potential diversifying asset class, established cryptocurrencies like Bitcoin and Ethereum look interesting here.

Note: SRAC became MNTS last week as the SRAC SPAC merger was approved. There are instances of both tickers in the notebook.

All the best in the week ahead.