In last night's quick post after the Sunday night sessions opened, I thought that this event would be a good litmus test for all sorts of concepts and strategies similar to 2022 or the Tariff Panic. Nope. Or maybe, not yet? They're telling us the actual military event will go on for at least a little while. It would be great if from a markets standpoint it was over already. That's not a prediction, I don't know but I tried to prepare clients in an email that this could take a while to sort out but no downside if it markets move on quickly.
This is just a microcosm from the open of regular trading on Monday that illustrates the risk of treasury ETFs. They all finished the day lower than when I grabbed this look. At any moment, treasuries could turn right around and go up (in price). But as we've been saying for many many years, treasuries are not the cure-all that so many believe them to be. Not even believe, that so many rely on.
It would be fair to think my position of having no duration is further than you want to go. But then, it would also be fair to say that duration is just another alternative strategy that might work very well in a specific event, whether it is a quick event or a longer term event. In that light, sizing it as an alt, at 5 or maybe 10% would make far more sense than 40% like in a plain vanilla 60/40 portfolio.
We focus on portfolio robustness here and as nano as today's opening was, any argument that bonds make portfolios robust is lost on me at this point. They worked for a long time but now it really is a coin flip. Bonds went down in price because of perceptions that oil prices will remain elevated which of course puts upward pressure on price inflation. There's no way to know whether that will happen but is certainly is plausible.
We talk about it regularly, robustness comes from having several diversifiers because you never know which ones might not "work" in a given event. Managed futures was really a mixed bag. Managed futures with client/personal holding BLNDX had a good day while the replication ETF I also use was down. Gold was obviously higher, BTAL was up when stocks opened lower. Any of those, or the others we talk about could have done anything today, just like duration could have gone the other way, the uncertainty of war could have easily prevailed over the price inflation concerns so, repeated for emphasis, duration has just become another alt to be sized with a small weighting if any weighting (I chose no weighting).
The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.
No comments:
Post a Comment