Some thoughts here from Nomura’s Macro Strategy Team on recent market positioning and events. They think equity investors remain extremely complacent and the SPX could be headed for 1300:
– Key near-term risks are political; the US election, the fiscal cliff debate that follows it and the long-term outlook for US monetary policy that is dependent on the result. There is also the Spanish regional election.
– We see evidence that the market is positioned long of risk.
– The earnings season thus far has not been good and economic data in the US and Europe are, at best, mixed, relative to expectations of a Q4 rebound that we believe may be disappointed.
– The trades we like for a tactical play now are selling SPX (outright or via options), buying the USD (except against the JPY), buying US rates – 5yr outright or 10yr against swaps, and for those in the metals space we would look at buying gold at these kind of levels.
Source: Nomura Macro Strategy Team
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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