Strategy Note: WOTE US Long/Short Equity
Degrossing further as the market levitates on Tech.
Current View
Action
WOTE US Long/Short Equity positioning taken down from 50% SPLG (S&P 500 ETF) to 0%.
Discussion
Last week on January 11, building on the degrossing progress that was initiated on January 4, we adjusted WOTE US 60/40 positioning down to 50/50 SPLG/BIL and WOTE US Long/Short Equity positioning down to 50% SPLG in preparation for a tactical pullback in equities over the next 4-8 weeks. Our current view of a neutral structural outlook, bearish cyclical outlook, and a bearish tactical outlook calls for as little as -50% equity exposure in the WOTE US Long/Short Equity strategy, but out of respect for the Yellen/Brainard/fiscal deficit put that sits beneath the market we are gradually moving toward the recommended exposure. Last week we dropped US Long/Short Equity exposure to 50% SPLG, and this morning we brought it down to 0% as SPX and NDX levitate on the back of Tech. This is classic pre-correction behavior where breadth melts beneath the surface of large caps ahead of large caps themselves following suit in the coming days and weeks. If equities continue higher from here, we will bring exposure down to the -50% minimum recommended by the tactical trading range framework illustrated below.
Positioning Framework
Disclaimer
NOT FINANCIAL ADVICE
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