Risk barometers are still pausing even during the rally:
Stocks to Bonds
High beta to low beta
Consumer discretionary to Staples
Copper to Gold
Important to note: As the Fed’s hiking cycle comes to a potential pause, we’ve seen a significant drop in correlation between risky assets and rates.
Quality factor (QUAL) with continue to outperform SPY through the chop
We mentioned Chinese Innovation (KSTR) 12% ago.
Private equity is hurting and investors are stuck getting capital called with little to no distributions.
With a 5% cash rate, numerous fixed income assets fail to provide the necessary incremental returns to offset the increased volatility. Investment Grade Commercial Paper, yielding around 6% over 9-12 months, presents minimal duration and credit risk. Considering the 30-40 bps monthly risk-free return, it's difficult to ignore such uncorrelated assets. Consequently, cash and similar instruments should hold a more prominent position in portfolios today.
QQQ: Our high-water mark of $320 has been reached.
Mega-cap continues to outperform equal market weight
Risk barometers are pausing in this rally (not good)
Private Equity is hurting hurting
Return always wants its risk payment. NOT INVESTMENT ADVICE.
What are your thoughts on risk/reward for High Yield and Floating rate funds for the next 6-9 months?