De-risking is the theme of the moment

July 19, 2024 at 07:16PM
Where do you hide today?

Bonds are down

Megacap tech is down

Stocks are down across the board

Gold is down

Commodities are all down, including 3% in oil

Full credit to anyone who bought bitcoin, which is up 4.6% today and has had a nice rally from the Mt. Gox headlines early this month. But for 95% of market participants, there is nowhere to hide here.

This Crowdstrike fiasco certainly isn’t helping and liquidity is bad today with some algos shut off but I don’t think that’s the whole story. Market participants are de-risking right now, taking down leverage and heading to the sidelines. It’s been a nice year already and no one wants to get blown up on vacation in July/August.

Layer in angst about the upcoming earnings season and an AI/chipmaker trade that needs a breather and it’s tough to have conviction. There’s a Fed put but by September the FOMC could be behind the curve and the macro situation is less clear.

…and don’t even get me started on politics.

All that said, the case to de-risk here is a strong one and I think it started in early July and I doubt it’s over yet. Moreover, that money isn’t going to be in a rush to come back and buy ahead of poor September seasonals and that could even stretch into November.

So if you’re a fund manager who has matched the 16% rally in the S&P 500 this year (or is even close), what’s the incentive to push your luck here? I don’t see it.

This article was written by Adam Button at www.forexlive.com.