Hello!

The month of October has started on a very volatile note. The intensity of the downside move was evident in the sharp decline in stocks on Wed, Oct 10.

We suspected that concerns relating to trade tariffs, upcoming elections, a stronger dollar, and forward earnings guidance would be evident during October. Thus, the model portfolio exposure was reduced going into October. However, the unexpectedly sharp rise in yields over the past few days, following comments from the Federal Reserve Chairman Jerome Powell, became a rapidly growing burden for the market to bear and it capitulated.

Typically, sharp market declines are also accompanied eventually by sharp rallies as the market struggles to find a state of balance. Though such sharp drawdowns, like the one on Wed, are infrequent, drawdowns or declines, in general, are quite frequent and the market is typically in a state of drawdown 60% of the time. One has to adjust accordingly. 

The market environment has turned quite unfavorable in a very short period, and if the model portfolio was mostly in Cash then that's where it would remain till the end of the month. However, that is not the case presently and the model portfolio is 75% invested. As a result of rising uncertainty in market conditions and a shift in market trend, the model portfolio will be closing the following positions on Thu, Oct 11. 

1. Transenterix  -  TRXC
2. Affimed NV  -  AFMD
3. Funko Inc  -  FNKO

Thereafter, the model portfolio will have 5 positions left.

Any further adjustment, if required, will be done after the week is over, and an update will be sent out on Sunday. 

For any questions, kindly contact us at support@GraycellAdvisors.com or simply use the website Contact form.

Sincerely,
Graycell Advisors

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