Good morning, from snowy Hingham.
A few of you reached out to me in recent days, expressing concern over the string of losses the market has experienced. I personally have never become numb to sell-offs, but I have become “seasoned” to the point that such corrections raise my level of intrigue as to evolving bargains more than the fear of what could be a prolonged downturn. Tailwind has mitigated the latest turbulence in several ways. Firstly, we have been holding a higher-than-normal position in cash and other defensives such as Treasury Inflation-Protected bonds, gold, and lower correlated positions like commodities. We also initiated a position in many accounts (HEGD) that has an options strategy around underlying S&P 500 positions. HEGD has fallen only a fraction of the S&P 500 during this sell-off, and should capture a more significant portion of the upside when the market recovers.
Please feel free to reach out to me at any time -- including weekends and nights. It is normal for any of us to feel unsettled during such periods, but this too shall pass, and Tailwind is positioned to purchase select opportunities that arise out of such environments.
To note… Tailwind’s 401k asset allocation service has been effective lately in taking a much more defensive stance ahead of this market correction. Should you or a colleague have interest in this service, please let me know.
(Update sourced from Seeking Alpha)
Investors dig in next week with the Nasdaq and S&P 500 Index coming off their worst weekly loss since March of 2020. The Nasdaq is down 16% from its high and is having the worst start of a year since 2008. A huge rush of earnings reports could shift the focus with the list of major companies heading into the earnings confessional including Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Tesla (NASDAQ:TSLA), Intel (NASDAQ:INTC), and McDonald's (NYSE:MCD). The two-day Federal Reserve meeting will also dominate the conversation with more clarity on the end of quantitative easing anticipated and potential clues on the pace of interest rate hikes that could swing Treasury yields. It is also gut check time in the crypto market after Bitcoin (BTC-USD) shed 16% last week and Ethereum (ETH-USD) lost 24%. Cryptocurrency miners Marathon Digital (NASDAQ:MARA) and Riot Blockchain (NASDAQ:RIOT) also took on heavy losses against the backdrop of tighter Fed monetary policy. The week ends with the fourth-quarter GDP report arriving to expectations that the economy grew at a 5.8% pace despite some Omicron headwinds.
FOMC meeting preview: The FOMC meets next week with Fed watchers looking out for any wildcards on the central bank's view on full employment, the anticipated omicron impact on growth and the pace of interest rates hike. The consensus view ahead of the meeting is that the central bank will fire off three or four quarter-point rate increases this year beginning with the March 15-16 meeting. Fed funds trading suggests rate hikes for the June 14-15 meeting and September 20-21 meeting as well before the forecast gets a little more muddled. While inflation has not peaked yet, by the middle of the year the comparisons are expected to become slightly easier when the economy laps some of the re-opening burst of activity and supply chain issues. The odds of a surprise rate hike next week are considered very low.