Global Macro Watch™ – Market Risks

Investor sentiment reached new highs after the Trump speech last week.  Instead of putting new money into the market at this stage, we would suggest investors to tread carefully.

Over the last couple of months, we have been increasing our contrarian positions against the markets.  These were done selectively on certain stocks and sectors.  However, we are now taking broader positions on whole markets dropping.   Positions have been added to broad indexes in emerging markets (China, Brazil and emerging markets) and in broad US indexes such as the S&P500 and Russell 2000.   These positions are for implementing a negative outlook.  A list of negative positions includes puts on indices such as SPY, IWM, FXI, EEM, EWZ, and specific stocks like CAT.

The list of market risks is very high and include Brexit, China-US trade war, French elections, Greek & Italian Debt problems, North Korea, etc.

In addition, the FED will raise rates 4x this year versus market expectations of 3x.