This Week in the Market

With Scott McCaghren and Tony LaPorta

Domestic equity markets have seen a recent grind higher in price as stocks head into fourth quarter earnings announcements. Thus far, earnings have been overwhelmingly positive which has helped fuel the uptick that has been experienced as of late. We still believe in our stance with regard to the protection that we have built into the portfolios; however, we now feel the need to shed some of it while there are still some modest gains to be had. The result of this will be more exposure to the market to both the upside and the downside. Our biggest concern is that the stock market has a repeat performance of last year which was significant selling into the end of the year. We have discussed for many months now about the drawback to the type of hedge we implemented: time decay. Volatility is not a suitable long-term hedge but works wonders for the short-term. We have to manage how much decay we allow that position to have so that it won’t eat into current profits on the year. There have been many inquiries as to why performance has seemed to have peaked and the answer to this is directly correlated to the amount of protection versus market exposure. Once this is pared back, portfolios will regain more upside potential while keeping in mind that it works both ways. TLP made some good points in the audio portion of this week’s commentary surrounding the Brexit situation and what it means to Europe in general. We maintain our position that something globally is not right and Joe Mainstreet doesn’t know what that is, YET. These are not our father’s markets today which means we have to take a bit more of an unconventional approach at times. Our main goal is to have a nice return at the end of the year by whatever means we must utilize to achieve that. 

 

As always, we continue to monitor all equity, treasury, commodity and currency conditions in order to efficiently deploy capital as well as protect invested assets.

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