At the beginning of this week, in an earlier article, I mentioned how I’d taken some profits and reallocated my portfolio. The markets were volatile, but overall I was optimistic…lower energy was good news for consumer oriented equities. Through the week, I actually added some new positions, including a German equity EFT. To quote the euphemism, I was “buying the dips.”
Today I sold all the positions I’d entered into since this uptrend began on October 21, 2014.
Why? Although the markets were turbulent this week, I knew the Federal Reserve would be conducting a press conference next week. What would they say? Whatever it takes to calm the markets…so although things looked rough this week, I assumed the Fed could paper over it next week…the delusion would continue and we’d finish the year with a pleasant Santa Claus rally. [Or should I say a Janet Yellen rally?]
That still might happen.
So why did I turn tail and sell out? What worried me more than the instability in the stock market this week was the slide in US Treasury yields. The 10 year bond fell over 8.5%. [From 2.3% to 2.1% and this occurring at the same time that consumer spending is accelerating.] That indicates that Big Money is panicked and looking for a safe haven.
The fear is that there will be significant defaults in Energy Sector debt (corporate as well as government). This could cause a global liquidity problem [i.e. panic] and thus the spill over to stocks.
All this could blow over next week, but I’m not taking any more risk. I’m preserving the profits that have accumulated over the past 7 week and I hope you are too.
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