Ever the optimist, the headlining story from Wall Street is that the large-cap equities sector scored a modest gain for the first quarter, a 2.2% lift in the benchmark S&P 500. This was achieved mostly due to a technical push that kick-started the index over the last two trading sessions (ie. Janet Yellen opening her mouth) : otherwise, had the markets closed last week, we would have been staring at a sub-1% gain.
Of course, that's splitting hairs. I'm more interested in how equities managed to eek out a respectable performance in light of so many fundamental headwinds. To answer this pressing question, I turned to my fellow hedge fund managers that employ physics-based models to better guide their investment decisions by comparing the first quarter performances of 2013 and 2014 in terms of market velocity.
Last year, the first quarter was defined by a relatively even range of trader sentiment, with only a few days where the markets followed a statistically anomalous path.
Of course, that's splitting hairs. I'm more interested in how equities managed to eek out a respectable performance in light of so many fundamental headwinds. To answer this pressing question, I turned to my fellow hedge fund managers that employ physics-based models to better guide their investment decisions by comparing the first quarter performances of 2013 and 2014 in terms of market velocity.
Last year, the first quarter was defined by a relatively even range of trader sentiment, with only a few days where the markets followed a statistically anomalous path.
However, the most recent quarter that we had was marked by uneven, perhaps pensive trading sentiment, with activity plotting a wide and unpredictable range.
This is indicative of the professional money not knowing where to make their capital work for them : indeed, with the Fed constantly playing the part of the seductress, taking away the QE punchbowl only to promise its return later, equities have lost much of their directional momentum. In addition, there's been more instances of sharp volatility in 2014 than was recorded in the first quarter of the prior year, which may be a harbinger should any fundamental trouble spot, such as a geopolitical incident, take an unexpected turn.
Regardless of what may actually happen over the next two or three months, I've been very consistent : there's not much room here for improvement (assuming a bullish perspective) but there's plenty of downside just lying in wait. At the very least, a serious consideration to rebalance one's portfolio would be extremely prudent.
Regardless of what may actually happen over the next two or three months, I've been very consistent : there's not much room here for improvement (assuming a bullish perspective) but there's plenty of downside just lying in wait. At the very least, a serious consideration to rebalance one's portfolio would be extremely prudent.
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