Date: January 29, 2024

Huge Week Ahead

Last Friday’s blog, The Ducks Are Quacking – Most Selling I Have Done Since 2022, certainly generated a response. I do enjoy hearing from readers, whether you agree with my thoughts or not. I had to remind people that I am not turning outright negative and we still have a significant amount of “risk on” exposure, especially in our aggressive strategies. However, where we had more than 100% exposure in other strategies or where I saw odd underperformance, I reduced exposure and will look to replant on weakness, knowing full well that a pullback may not come.

A number of folks asked about the things we sold which I do list at the bottom of each issue. We outright sold high beta as expressed in the SPHB ETF as well as some small cap ETFs as their leadership had waned and they fell down the pecking order of winners. We sold or partially a number of sector ETFs, like semis, internet, REITs, utilities, retail and biotech. REITs and utes started to lag badly. The others had been huge winners and our models said to reduce exposure to 100% or less. We still own semis, internet and biotech and I won’t be surprised if we buy them back into weakness.

This week is a big one for earnings and the Fed. I cannot believe the Fed is going to come out and tell the market all these rate cuts are coming and take another victory lap. Stocks have surged and sentiment is frothy. Is Jay Powell really going to feed into the frenzy? I guess it’s possible but that’s not the most likely path. Right now, I am looking at strength, especially into the Fed meeting, as a selling opp.

The stock market still has leadership from the Dow Industrials, S&P 500 and NASDAQ 100. If small caps get into gear and decide to lead again, I will have to reassess.

On Friday we bought EMB. We sold FFEB, levered, inverse S&P 500 and some AVGO.


Paul Schatz, President, Heritage Capital