Hello!
Market updates are typically not planned during the month. However, the sharp volatility in stocks, unmatched this year, is requiring an adjustment to the model portfolio during the month itself.
While there was a combination of multiple reasons that contributed to the decline, the catalyst was the sharp spike in bond yields following comments from the Federal Reserve Chairman. The ferocity of the decline was unmatched in recent memory and probably sheds light on how the nature of the market is transforming as trading and portfolio balancing become even more algorithmic-driven. The post A Federal Reserve Jolt discusses the bank comments and its implications.
The intensity of the selloff can be gauged by the fact that the Nasdaq and the Russell 2000 indexes at their lows declined -10% thus far in October.
At this time the stock market is so much oversold that one can reasonably expect a sharp move higher on some days. However, the near-term market uptrend is broken and it will require a period of healing over the next few weeks. It is exciting to bottom-fish and be buyers, especially for short-term traders, as one has much to choose from after the sharp sell-off. But the risks are high that volatility has not seen its final days in this episode, and we will witness some sharp moves down as well.
Strong earnings and guidance can be the most important soothing balm that can contribute to a faster healing and recovery. It is important to note that the positive long-term fundamentals and the overall bull-market still remain intact at this time.
In our October 10 email update, also available in the Members Area, the model portfolio exposure was reduced to 50% or 5 positions. This level is being reduced by 1 position. The position being closed is:
SLDB - Solid Biosciences
The model portfolio will now hold 4 positions and be 40% invested. The next reassessment will now occur most likely at the customary end of the month period.
For any questions, kindly contact us at support@PrudentBiotech.com or use the Contact form.
Sincerely,
Graycell Advisors