The Bottom Already?

 It’s been another intense week that started with:

• The large-cap Tech stocks within the 'Magnificent Seven' losing about $3 trillion!

• The VIX had its largest one-day move on record by rising above 65 while it was at 10.6 less than a month ago

• Japan's Nikkei was down more than -12% on Monday which is its worst day since 1987.

After this all happened, markets started to rebound, but don't mistake countertrend rallies for actual bottoms.

As volatility is very high in a bear market, these bounces tend to be huge. It’s essential you don’t mistake these as an actual bottom in the market. 

In the longer term, it’s important to note that the wealth gap is increasing in terms of sentiment. This is not a surprise, as 99% of businesses in the US are small businesses, and their earnings are horrible. 

In the current environment you can also see the rich benefiting from:

• Higher Rates as they get paid on their excess liquidity.

• Reflation in asset prices as they own a disproportionate share of financial assets.

The below-average (in terms of income) continues to struggle due to:

• Higher cost of living inflation while broadly missing out on the income upside associated with higher rates.

• Loses discretionary consumption capacity as a share of wallet goes to service higher debt costs.

• Becomes increasingly vulnerable to income shocks as any residual cash cushion is exhausted.

Our allocation remains defensive as this stance is proven to work in the current environment of slowing growth and slowing inflation:

• Utilities 

• Consumer Staples

• Healthcare

• Insurance ETF

• Real Estate Select Sector Fund

• India

• South Africa

• Emerging Markets Bonds

• Investment Grade Corporate Bonds

• Gold

Thank you,
Philippe