The conservative approach

May 23, 2016 09:44 AM

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Another air disaster did nothing to allay fears of possible terrorist activity, even as there has been no positive determination of the cause of Egypt Air flight 804.

Until the black boxes are found, speculation will persist as to whether it in fact was a terrorist act. Meanwhile markets remain mired in triple digit moves back and forth. We continue to feel a conservative approach to investment management is imperative.

The ongoing rhetoric from both sides of the aisle continues. Now for some actual information...


Interest rates

The 30-year Treasury bond closed at 164 10/32nds on Friday pressured by the gain in equities. The yield on the 30-year bond was up 2.1 basis points to 2.657%. The sideways trade in bonds could be attributed to concern over what, if anything, the U.S. Federal Reserve will take any action on rates tied to economic data. While we feel the U.S. as well as its trading partners are headed for another round of recession keeps us on the sidelines.


Stock indices

The Dow Jones industrials closed at 17,500.94, up 65.54 points on shortcovering after the sharp selloff Thursday. For the week the Dow lost 0.2% posting a fourth weekly loss. The S&P 500 closed at 2,052.32, up 12.28 points on technology and health care gains and for the week managed a gain of 0.3%. The tech heavy Nasdaq closed at 4,769.56, up 57.03 points and for the week rose 1.1%, the first weekly gain in four.

Analyst expectations for Fed interest rate increases during the rest of 2016 prompted by assumptions of better economic conditions lent credence to such possible action by the Fed. However we do not believe any action by the Fed based on our view of global economic growth anemia and continue to expect a sharp market correction in the not so distant future. Our admonition to investors of large equity portfolios to implement strategic hedging strategies remains intact.

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About the Author

John has over 40 years experience at major U.S. Brokerage firms as Manager and Director of various International Divisions and is the founder of his own trading and brokerage firms. Over the years John has gained a wealth of knowledge and experience in all aspects of investments and trading. He was also a floor trader at the Commodity Exchange in New York. He formed Acuvest in 1999 and can be reached at futures@acuvest.com.