Market on Edge as Election Winds Howl
This week’s market feels like navigating the backstreets of a neon-lit city, where every shadow hides a risk, and every move is a gamble. The “Trump Bump” surges through the system like an electric hum, but inflation looms—not just a chill in the air, but a specter poised to haunt every decision. Giants in tech and energy command the stage, yet fractures deepen beneath their steel armor. The Fed’s whispers echo faintly—enough to stave off collapse, but for how long?
Step into the fog; let’s expose what’s hiding in the market’s underbelly.
1. Market Sentiment and Major Themes
- The “Trump Bump” Effect: Investor optimism clings to promises of a pro-business windfall, like a gambler gripping his last dollar at a midnight table. Large-cap tech and energy stocks ride high on hopes for tax cuts and federal spending, casting long shadows over other sectors. AI’s explosive ascent continues, and fossil fuels burn steadily—a remnant of the old world feeding this digital dystopia’s energy hunger.
- Interest Rates and Inflation: The Fed’s recent rate cuts are a lullaby drifting through the market’s dark alleys, sedating fears—temporarily. But inflation waits—an unseen prowler, ready to strike when the spark of tariffs hits. Should inflation make its move, interest-sensitive sectors will be the first to shiver under its breath. Investors cling to pro-business optimism, but beneath that, tension stirs—a silent warning, barely restrained.
2. Sector Analyses and Playbook Updates
The market is a maze of flickering lights and shadowed corners. Some sectors glow with neon intensity, while others bide their time, waiting in the dark.
A. Energy & Commodities
- Play Recap: We’re anchored in fossil fuel plays (XLE, USO), steady as lifelines in the storm, while clean energy (ICLN) lingers—its potential chained by policy gridlock.
- Recent Developments:
- What Worked: Fossil fuels powered ahead—XLE and USO turned like gears in a well-oiled machine, grinding out gains as demand held strong.
- What Didn’t Work: Clean energy (ICLN) remains in limbo, unable to break free from political gridlock, waiting for a spark to break its chains.
- New Insight: Gold spiked to a record high before a quiet pullback—like stumbling upon a stash of forgotten wealth in an abandoned vault. Mining stocks stand as a hedge against inflation, a shield as we venture deeper into uncertain territory.
- Updated Playbook: Fossil fuels keep grinding forward—XLE and USO, steady enforcers in this market underworld. Clean energy remains a wild card; hold ICLN cautiously, awaiting a policy spark to ignite its path forward. Gold? Mining stocks might just be your armor against inflation’s shadow—hold steady for now.
B. Tech & AI
- Play Recap: We’re deep into AI (BOTZ) and semiconductors (SOXX), with large-cap tech blazing a trail through this cyberpunk sprawl.
- Recent Developments:
- What Worked: AI stocks are hotter than ever—Nvidia’s cash flows run wild, like a rogue algorithm hurtling beyond control, pulsing faster than regulators can track.
- What Didn’t Work: Some tech giants show overbought signs—warning signals blinking red, like broken streetlights in a darkened city.
- New Insight: AI and semiconductors are long-term stars, but valuations pulse with a sickly glow—overextended and primed to snap. Time to trim gains before the frenzy morphs into something darker.
- Updated Playbook: Hold BOTZ and SOXX, your guides through the digital wasteland. Trim profits where you can—keep cash on hand, ready to strike should this feverish rise cool down.
C. Healthcare
- Play Recap: Healthcare (XLV, VHT) has been our sanctuary—a bastion of concrete and steel in a world gone mad.
- Recent Developments:
- What Worked: Large-cap healthcare is steady as stone, a quiet stronghold in the market’s chaos.
- What Didn’t Work: Small-cap healthcare (PSCH) got battered, volatility swirling around it like debris in a storm.
- New Insight: In a market torn between hope and fear, healthcare’s defensive stance shines—it’s the bunker you retreat to when the lights start flickering.
- Updated Playbook: Stick with XLV and VHT, your safehouses amid the neon-lit turmoil. Let PSCH wait on the sidelines—healthcare is your fortress against the chaos of the unknown.
D. Chinese Markets
- Play Recap: We’re keeping a light touch on Chinese markets (FXI, KWEB)—too volatile to lean into, like a rigged game in a smoky den.
- Recent Developments:
- What Worked: A hint of gains flickered through Chinese equities, but they’re still trailing the force of U.S. growth sectors.
- What Didn’t Work: China’s markets remain in slow-motion decline, dragged down by tepid growth and geopolitical tensions—an unraveling on pause.
- New Insight: Chinese equities are speculative, risky players in this game; handle them like you would a high-stakes roll in a backroom game.
- Updated Playbook: FXI and KWEB are worth a cautious touch, but don’t put too much weight here. This is a high-stakes bet that might turn bad at any moment.
E. Bond Market & Interest Rate Update
- Play Recap: Short-term bonds (SHY) are our steady ground, while long-term bonds (TLT) stay at a distance, volatile with rate risk.
- Recent Developments:
- What Worked: Short-term bonds held firm, unmoved by inflation whispers—safe and stable, right where we want them.
- What Didn’t Work: Long-term bonds flinched as inflation fears edged up, as if aware of the unseen hand setting the trap.
- New Insight: Long-term bonds are tense, waiting for inflation’s full strike. Short-term bonds remain the anchor here—calm waters in an otherwise turbulent sea.
- Updated Playbook: Stick with SHY for stability. Keep long-term exposure limited—don’t be caught holding when rates make their move.
3. Q4 Strategy and Year-End Positioning
As year-end approaches and the skies grow heavier, a strategic balance is your best defense:
- In overbought sectors like tech, pocket some profits while the neon’s still glowing—liquidity will be your lifeline when prices inevitably pull back.
- Keep your portfolio balanced between growth areas and defensive shelters like healthcare and short-term bonds—they’ll anchor you against sudden squalls.
- Lean into inflation-resistant assets as needed—healthcare, dividend-heavy utilities, and mining stocks could be your silent protectors in a world where inflation prowls closer each day.
Stay alert, stay agile. In this noir-cyberpunk landscape, only the vigilant survive. Every move must count—these markets are no place for the faint-hearted.
Q4 2024 Incremental Portfolio Build Guide: Target Allocations and Weekly Entry (Exit) Points, November 8, 2024
| ETF | Sector | Target Alloca-tion (%) | Recent Price – Buy(Sell) x @ limit | Positive Factors | Negative Factors |
|---|---|---|---|---|---|
| XLE+++ | Energy | 10.75% | $93.75 – 40bps @ $87.16 | Strong demand, geopolitical support | Oil price sensitivity to demand changes |
| USO++ | Oil | 5.00% | $73.13 – 20bps @ $70.11 | Inflation hedge; safe-haven asset | Dependent on global growth |
| ICLN+ | Clean Energy | 4.00% | $12.38 – 15bps @ $12.59 | Anticipated support from COP29 | Needs clear policy backing, high volatility |
| GLD++ | Gold | 4.75% | $247.96 – 20bps @ $246.28 | Safe-haven; hedge against inflation | No income yield |
| SLV++ | Silver | 3.50% | $28.48 – 15bps @ $28.18 | Inflation hedge; industrial demand | More volatile than gold |
| BOTZ+ | Tech & AI | 3.00% | $33.73 – 10bps @ $31.41 | High AI demand; automation exposure | High P/E ratios, speculative risk |
| SOXX++ | Semi-conductor | 3.50% | $231.36 – 15bps @ $218.69 | Key growth from AI and tech expansion | Valuation sensitive to rate hikes |
| XLK+ | Large-Cap Tech | 5.00% | $237.16 – 20bps @ $222.71 | Large-cap stability; lower volatility | Sensitive to bond yield increases |
| QQQ++ | Large-Cap Tech | 5.00% | $514.14 – 20bps @ $482.69 | Broader tech exposure with growth potential | Sensitive to rate trends |
| ROBO+ | Automation & Robotics | 3.50% | $58.00 – 15bps @ $54.85 | Diversified automation; moderate valuations | Slower industrial adoption |
| ARTY– – | Robotics & AI | 1.50% | $36.25 – (15bps) @ $33.68 | Balanced exposure to AI and robotics | Limited upside due to equal-weighted structure |
| XLV++ | Healthcare | 7.25% | $150.18 – 30bps @ $145.66 | Defensive play; low correlation to volatility | Regulatory risk |
| VHT+ | Healthcare | 6.50% | $277.47 – 25bps @ $268.28 | Resilient in inflationary periods | Lower growth than tech |
| XHS++ | Healthcare Services | 2.75% | $96.42 – 10bps @ $92.75 | Benefits from rising service costs | Policy-sensitive risks |
| PSCH– – | Small-Cap Healthcare | 0.75% | $47.72 – (15bps) @ $42.84 | Niche growth in small-cap healthcare | High volatility; regulatory sensitivity |
| FXI++ | Chinese Large-Cap | 2.50% | $31.47 – 10bps @ $30.81 | Limited exposure; potential policy support | High regulatory and geopolitical risk |
| KWEB– – | Chinese Tech | 0.75% | $32.00 – (15bps) @ $31.24 | Exposure to China’s tech | High volatility; ongoing U.S.-China tensions |
| TAN++ | Solar Energy | 2.75% | $36.04 – 10bps @ $35.58 | Growth potential from COP29 and policy backing | High volatility; policy dependency |
| FAN++ | Wind Energy | 2.25% | $15.95 – 10bps @ $16.08 | Long-term wind growth; climate support | Policy-sensitive volatility |
| SHY+ | Short-Term Bonds | 2.50% | $82.07 – 10bps @ $82.02 | Short-duration bond hedge | Lower yield |
| IEF++ | Inter-mediate-Term Bonds | 3.00% | $94.20 – 5bps @ $93.38 | Balanced duration for stability | Rate sensitivity |
| HACK+ | Cyber-security | 2.75% | $74.16 – 10bps @ $68.84 | Increased cybersecurity demand | Market sensitivity |
| PAVE++ | Infra-structure | 3.00% | $45.09 – 10bps @ $40.19 | Infrastructure growth; bipartisan support | Economic sensitivity |
| IDRV++ | EV & Auto-nomous | 2.25% | $30.38 – 10bps @ $29.44 | EV and autonomous vehicle growth | Supply chain risks |
| BBRE+ | Real Estate (REIT) | 2.50% | $100.28 – 10bps @ $97.65 | Inflation hedge; income stability | Rate sensitivity |
| Cash | — | 9.00% | — | Provides liquidity; flexibility | No yield; inflation erosion |
Key Adjustments This Week:
In the murk of a market riddled with inflation fears and speculative frenzy, we’ve shifted our positioning to align with ruthless reality. No rating upgrades or downgrades this week—just cold, calculated rebalancing to reinforce the fortress while shedding the unstable.
Strengthening the Core – Defensive and Inflation Shields
- XLE (Energy): Increased from 10.25% to 10.75%
Energy isn’t just fuel; it’s lifeblood in a dystopian economy hungry for stability. Demand pulses through XLE, powered by geopolitical tailwinds and inflationary protection. We’re boosting this allocation, bracing the portfolio with a sector that thrives in this dark inflationary current. - GLD (Gold): Increased from 4.50% to 4.75%
Gold stands sentinel, a glint of safety in the volatile haze. It’s a relic that doesn’t yield, but when the world tips, it holds the line. Increasing GLD adds a thicker armor against inflation, reinforcing the portfolio’s backbone with a classic hedge against chaos. - XLV (Healthcare): Increased from 7.00% to 7.25%
Healthcare is the steady heartbeat of the portfolio—immune to the neon storms rocking other sectors. In this volatile market labyrinth, it remains a safehouse, low on thrills but high on resilience. An increased allocation here cements our defense, protecting the portfolio from wild swings.
Trimming the Edge – Reducing High-Volatility, Speculative Bets
- KWEB (Chinese Tech): Reduced from 1.00% to 0.75%
KWEB is a high-stakes poker game in a backroom—shadowed by U.S.-China tensions and fraught with speculative risk. Chinese tech may hold promise, but the risks loom too large to ignore. We’re dialing down the exposure here, maintaining a minimal position in this unpredictable sector.
Incremental Shifts for the Long Haul
With these adjustments, we’re deploying a slow burn. Incremental buys will build up positions over the next 25 weeks, each step deliberate, calculated. Meanwhile, reductions are set to unfold over 10 weeks, steadily drawing down exposure without abrupt exits. This is a move toward balance—a careful dance in the twilight between growth and defense, speculation and stability. The goal? To hold ground as the market’s neon pulse flickers uncertainly on.
How to Use This Table to Incrementally Build Your Portfolio
This table provides a clear, tactical approach to building a diversified portfolio over six months. Here’s a step-by-step guide to effectively using it:
- Understand the Target Allocation: Each ETF’s allocation percentage reflects its intended weight within the portfolio, aligning with macroeconomic conditions and risk tolerance. Aim to gradually approach these target allocations by following the weekly basis point (bps) recommendations.
- Follow the Weekly Allocation Recommendations: Each ETF has a suggested number of basis points (bps) to accumulate in the upcoming week, along with a target price. These targets are based on recent trading patterns and technical support levels, providing favorable entry points. By purchasing in small increments, you reduce exposure to short-term price volatility and take advantage of potential dips.
- Monitor Price Movements: Check the market regularly to identify when each ETF nears its suggested target price for the week. If an ETF hits its target price, consider purchasing up to the recommended number of basis points. Alternatively, you can set a limit buy order at the target price. For example, a 20bps order on GLD (assuming a $100K portfolio – I know, it’s a lot, but I’m still working on something for smaller portfolios…) this week would be “Limit Buy 1 GLD @ 246.28 or better”. That’s a bit more that 20bps, but we can’t make limit orders on fractional shares, unfortunately. Make this a GTC that expires at the end of the week.
- Adjust Based on Market Conditions: If macroeconomic or sector-specific conditions change, be flexible with your allocations. For instance, you may pause allocations if volatility spikes or adjust your entry point targets if an ETF’s trend changes significantly.
- Maintain Cash Reserves for Flexibility: Cash reserves are part of the strategy, giving you the liquidity to increase positions in favorable conditions. Use this flexibility to capitalize on opportunities as economic indicators shift.
By following these incremental steps, you can dollar-cost average into each position, building a balanced portfolio that’s resilient in Q4’s dynamic market environment.
Musings from the Shadows (AKA, “The Disclaimer”)
Listen close, and listen good. What you’ve got here isn’t a stock tip or a road map to riches; it’s a shot of insight, served straight with a twist of caution. We’re just guides in this twisted market underworld, prowling through the back alleys of finance with a keen eye but no badges. We don’t have licenses, certificates, or any of those shiny credentials that make a person respectable in the eyes of the law. What we do have is perspective—a way of seeing the financial game from the shadows, but don’t mistake that for an invitation to go all-in on anything.
You see, this isn’t a solicitation to buy, sell, or trade so much as a whispered conversation in the corner of a smoky room. If you’re looking to make moves, you might want to talk to someone with a badge, someone who plays by the book—a licensed professional who knows the lay of the land and can help you navigate without falling into a pit.
Now, full disclosure: I’ve got my own chips in the game. My hand includes XLE, GLD, SLV, and QQQ. But don’t take that as gospel; take it as context. We’re all players in this market, and we all have our own skin in the game. So as you walk through this financial labyrinth, keep a clear head, a steady hand, and remember—the market’s a fickle beast, and it doesn’t care about anyone’s best intentions.
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