Recession fears weigh on sentiment
What is it?
An article from FXStreet brings up investor sentiment in the wake of admitted recession possibilities.
“Markets remain risk-averse on Thursday as investors grow increasingly concerned over a global recession. US stock index futures and major equity indexes in Europe push lower.”*
“While testifying before the Senate Banking Committee on Wednesday, Powell acknowledged that the Fed’s rate hikes could cause a recession.”*
Why does it matter?
We are seeing investors selling off volatile positions since those are affected more than stable investments on a percentage basis. As mentioned last week we plan on investing in more volatile positions once they begin to trend higher. Our investment philosophy is based on trying to ride the wave of a positive trend and momentum. To do that we are not trying to buy at the bottom but rather when securities are showing positive momentum.
“While testifying before the Senate Banking Committee on Wednesday, Powell acknowledged that the Fed’s rate hikes could cause a recession.”*
Chinese related investments are beginning to gain traction and we plan on adding more to those positions if the current trends hold up. We see this as a good opportunity since the chinese securities have been in a bear market for much longer.
Matrix Insight
What is it?
As mentioned in prior market insights, we use the Matrix to see how assets compare to each other based on trend and momentum. Assets with higher trend and momentum can move up to the top of the matrix while those with lower trends and momentum will be towards the bottom of the matrix.
The above photo is a snapshot of our matrix from Thursday June 24th 2022. From it we can see that OIL is in the overbought section. We try to invest in the things with strong or neutral trends before they become overbought. On the contrary, as assets move down the matrix to a weaker trend strength we are less likely to stay invested or add to those positions.
Why does it matter?
Currently VT (the Vanguard Total World Stock Index Fund) is at the bottom of the matrix. While we believe that a global stock allocation is a good way to grow wealth over time, we will remain cautious when considering investments in that asset class until it changes its trend.
As the matrix continues to change, we will be sure to provide an inside look at that part of our investment process.
Other articles we found interesting this week:
President Biden to ask Congress for a gas tax suspension
Stock market live updates: Stocks little-changed, Powell calls recession a ‘possibility’
Virginia Gov. Glenn Youngkin is flush with funds to fight the ‘silent thief’ of inflation
Current 401(k) portfolio
Our last portfolio reallocation: 5/19/2022.
Want more information?
The weekly market insight provides a window into the process we use in our investment management process. At Breakaway, we believe markets are always changing and require a nimble yet data-oriented approach.
Our process attempts to identify trends and momentum in the financial markets. With that information, we align our clients’ portfolio accordingly in the hope to help our clients accomplish their life goals while attempting to lower the risk of a large drop in their portfolio.
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Sources:
*Eren Sengezer. “Recession fears weigh on sentiment, eyes on US PMI, Powell’s testimony”. 6/23/2022. FXStreet. https://www.fxstreet.com/news/forex-today-recession-fears-weigh-on-sentiment-eyes-on-us-pmi-powells-testimony-202206230802
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