What To Do In Volatile Markets
Emperor JPow raised rates 25 bps again today. This came among a bunch of speculation that 2.5 bank failures (SVB, Silvergate, & SBNY) and CS needing a rescue. Clearly JPow didn’t think a bank run by dimwits, 2 crypto banks, and whatever dumpster fire CS is was enough. Nor was the pressure from numerous reports saying 100s of smaller banks are way underwater to the tune of 100s of Billion.
[What happened at SVB & other banks? Get caught up on banks here.]
This hopefully wasn’t a huge surprise as JPow has made it very clear that he isn’t stopping till he breaks enough stuff. Employment is still high (artificial as recent layoffs haven’t hit the headline numbers yet) and CPI is still hot (even hotter than CPI lets on) so he may not be done.
The S&P500 and Nasdaq were both down on the news, although only ~1.5% so the small rate hike was largely baked in.
The market continues to be volatile. For many, this means ‘stick your head in the sand’ and ‘just keep buying’ to ‘dollar-cost average’ over time. Other people see markets down as a buying opportunity because the grift-master flex Warren Buffet once said something about blood in the streets.
But what if you could use volatility to your advantage?
Or at a minimum, what can you do to limit it in the near-term?
This can be especially helpful on days of news breaking - like the FED updating the markets on rates. Choosing to be long or short is making a bet on the FED’s actions and statements. You can guess right, or you can guess wrong.
Or you can say “I don’t know where the market goes, but I know it’s going to react in some way”. If that is the case, what do you do?
Well, this week’s post is here to help you Fren.
Let’s Begin