MACRO BACKDROP:
Good Monday, readers. It seems very difficult these days for stocks to find the correct path forward, in my opinion. So I’ll keep this short. Last week, the underlying equities markets faced some adversity in the form of Theresa May’s cabinet members causing problems for Brexit proceeding smoothly with the E.U. This appeared to have sent capital flowing out of stocks and some currencies and barreling into treasuries last week, in my view. To me, the domestic economic outlook has not materially changed as investors continue to nervously wait for headway on U.S.-Sino trade and tariff speculation and interest rate sensitivity while watching the Fed. Add, to this, the recent deterioration in crude oil & some related energy prices, and we have a reasonable return of volatility threatening the upside for stocks, in my opinion. As of 11:30am CST on 11/19th, investors are brutally punishing stocks as index futures have dropped nearly 2% across the board, likely off of recent White House news regarding Vice President Pence on China and the G-20 summit. For those investors & traders holding any stocks or assets with unhedged stock exposure, it might be a good time to try and stop the bleeding as headline risk ever present, it seems. In my opinion, a good eye and a little diligence can be used to insulate a portfolio by using specified equity futures to define our risk and work to isolate it, depending on the construction of your portfolio and risk tolerance. If you’d like to see how this can be set up, I’m happy to discuss some strategies.
Futures and options trading involves substantial risk and is not suitable for all investors. Therefore, individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option will result in a futures position. The valuation of futures and options may fluctuate, and as a result, clients may lose more than their original investment. The information contained on this site is the opinion of the writer or was obtained from sources cited within the commentary. The impact on market prices due to seasonal or market cycles and current news events may already be reflected in market prices. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
For questions, comments or deeper conversation regarding these insights or to talk more specific trade ideas, please reach me via email: bsears@walshtrading.com or my direct line: (312) 957-8079.