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Bonds, buy Bonds

Earlier this month I wrote a post Bumpy road ahead. Short term traders probably think what a foolish call that was, because the stock market went nowhere but up since then. While the intention of the post was not to call the top, it was to warn you that volatility could pick up. Riding up trends in low volatility environment is nice, and while calling tops is not sensible, we must ensure we not become complacent. Easy times can last longer than most anticipate, but they can be escorted by volatile moments too.

You might want to try to play heightened volatility by buying puts or by executing some other options strategy, shorting stocks, or by doing something else. However, I think the best risk reward opportunity right now is to be long bonds.

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Bumpy road ahead

Markets fluctuate, they go up and they go down too. Our job is to make the most out of these fluctuations by going with, and not fighting, the tape.

Even though you could have pointed out many reasons why one should have been expecting a correction, or even a crash, we’ve been bullish for the most part of last year up until now. Looking back, that was the only right decision to be made.

However, we think now could be the time for becoming cautious going forward. We’re not becoming ‘the end of the world’ bearish yet, but the ride could become bumpier.

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