It's not so much that I'm bearish. Call me skeptical.
I was a maniacal, raging bull as we entered 2019. Since then, however, investors have become unduly comfortable. The reason, of course, is that earnings have now provided a warm, cozy blanket for investors to snuggle under while they begin counting the number of cookies mama bull will bring to their bed.
Investors becoming comfortable makes me a bit uncomfortable.
While we continue to be very long equities here, the mix of exposure has changed. First, I'm seeing more opportunities on the short side of the market. Earlier in the week I shorted some QQQ as a hedge to offset some of our tech exposure. I also took profits on our MSFT position, which was my pure play on the Nasdaq.
It's not just tech, however, that is worthy of some rotation. Financials are arguably providing an even warmer blanket for investors, as we now KNOW that bank earnings are fine. It has caused those investors who sold in December to pile back into some of the mega-banks, like Citi and Bank of America. Again, it is simply too cozy a scene to be comfortable with, for this investor, at least, which is why I took profits on our USB (my pure play on financials) position this week.
The name of the game here and now is rotation. While it may be too early to get short, it's not too early to get conservative. Selling some tech and financials in order to gain exposure in names that haven't made their move yet isn't a bad trade. We added ALL and BMY recently in keeping with the conservative rotation theme.
It's not time to sell em'. It's not time to hate em'. It's simply time to rotate em'.
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