Thoughts on the Recent Market Sell-Off
As US equities have not really corrected since Dec last year, it should not be surprising that we finally get one now. From a technical viewpoint, the US S&P500 index has cut through the 50-day moving average. However this is normal during corrections. In fact, the large correction happening now is an indication that the rally can be further sustained.
It must also be noted that the recent sell off is accompanied by lower volume (Figure 1), therefore there is a lesser need to worry.
Image courtesy of Stockcharts.com
Figure 1: S&P 500 Large Cap Index
The cause of the sell-off is that markets are still anxious about current problems like the European debt crisis, sustainability of the US economic recovery and a possible hard landing for China. However one good thing to note is that oil prices have started to come down, thereby reducing one key macro risk for markets. Meanwhile TED spreads (the difference between interest rates on interbank loans and short-term US government debt) remain steady, indicating no renewed credit stress.
Conclusion & Portfolio Positions
For now, we still see markets as going through a consolidation or correction. As such we do not recommend any changes to our portfolios for the time being.
IMPORTANT NOTES: This report is provided for the information of the intended recipient only and should not be reproduced, published, circulated or disclosed to any other person without the prior written consent of GYC. The information and opinions expressed herein reflect a judgment of the markets at its original date of publication and are subject to change without notice. GYC does not warrant the accuracy, adequacy or completeness of the information herein and expressly disclaims liability for any errors or omissions. The information is given on a general basis without obligation and on the understanding that any person acting upon or in reliance on it, does so entirely at his or her own risk. Any projections or other forward-looking statements regarding future events or performance of countries, markets or companies are not necessarily indicative of, and may differ from, actual events or results. Neither is past performance necessarily indicative of future performance. You should make your own assessment of the relevance, accuracy and adequacy of the information contained in the information provided and make such independent investigations as you may consider necessary or appropriate. Accordingly, neither GYC nor any of our directors, employees or Representatives can accept any liability whatsoever for any loss, whether direct or indirect, or consequential loss, that may arise from the use of information or opinions provided.
GYC FINANCIAL ADVISORY PTE LTD 1 Raffles Place #15-01 One Raffles Place, Singapore 048616
Tel: (65) 6349-1441 | Fax: (65) 6349-1440 | Email: firstname.lastname@example.org | Co Reg: 199806191-K