So, the market is going down…

Post date: 2024-04-17 15:55:57 GMT

What can you do to fix that?

The news is bad. I did not read anything specifically bad, but our AbleMarkets News AI has been very negative on the news as they relate to the U.S. markets since the start of the second quarter in 2024. The U.S. Fed’s decision not to cut rates last week further nailed most of the stocks, according to AbleMarkets analysis. This is a drastic change from the previous 7 or even 8 quarters: when all the gurus were promising a quick crash, our News AI insisted on a rosy outcome. And hey, the rosy outcome did materialize!

As always, everyone is a superstar investor when the markets keep going up. For one, most stocks in the U.S. are highly correlated with the market. In quant speak, most stocks are exhibiting “high beta”, a metric of return dependency on market returns. When the markets go up, buy and hold strategies work for most stocks, so anyone can buy and hold pretty much anything and obtain positive returns. Unfortunately, high beta also means that the stocks go down quickly once the markets change direction. What was once a breakout star of a stock, all of a sudden, looks like a terrible liability. So what can you do to fix that?

1. Hedge. A traditional approach for portfolio management prudently calls for protection. A hedge can be something as simple as diversification: don’t put all your eggs into the same basket, they said. This advice totally makes sense and AbleMarkets has developed a series of tools that make portfolio allocation and diversification a lot more precise and profitable (reach out to find out more!). Another option is to actually build an investment protection from other financial instruments like futures and options, but those strategies can get pretty expensive very quickly.

2. Follow the news for stocks that are thriving in the current climate. Traditional equity analysts read all the news that fit to print in order to make sense of the world, and usually take about two weeks to mull over and produce a Buy/Sell/Hold recommendation. With AI, such as our proprietary in-house AbleMarkets News AI, we do the same, but with more news, social media and other information we can get, and in real time. That means that instead of a two-week wait, our models spit out an accurate recommendation nearly instantaneously. What are the hot stocks to buy these days, you ask? At the time this article was written, the few promising names to buy according to our News AI were companies like United Healthcare Group (UNH) and MACOM Technology Solutions Holdings, Inc. (MTSI). MTSI develops cutting-edge military technology, sadly in high demand in our present climate. UNH has just posted stellar results, much with the help of technology.

3. Look what your competition is doing. Institutional flow makes a big dent in the market, a dent that lasts at least one week due to pure microstructure dynamics, but can also last a month, a quarter or a year if the managers actually know what they are doing. AbleMarkets AI tracks institutional flows. Our analysis indicates that institutions are holding on to Rivian (RIVN) and a handful of other companies, but as of past Monday, have broadly initiated a sell-off bordering on bloodbath in many other stocks. This morning, however, UNH did get a nod from at least some institutions who chose to put the money there.

4. Subscribe to AbleMarkets! Hey, we are here to help you do your job. It’s been a long process for us to become as good as we are now, and we’d love to share with you our findings. Reach out to me directly to kickstart the process that is more centered on your objectives.

DISCLAIMER:

AbleMarkets expressly does not take any responsibility for any profitability or losses incurred in association with AbleMarkets products. All the risks of using AbleMarkets data are borne strictly by the investors and data licensors. Past performance does not guarantee future results. Additional Terms and Conditions apply as specified in the online (AbleMarkets.com) or written agreement.