Backing Off Risk A Little More
We sold roughly 25-35% of our positions in financials and technology today. We still like these sectors, but the market looks tired. If stocks go higher, we still have a stake. If stocks pull back 5% to 10%, we can redeploy the cash at lower levels.
A short-term scenario where the S&P 500 makes a new high is still a possibility. As we have mentioned recently, we will look to be buyers on any corrective activity especially an episode lasting two to three weeks.
We have reduced risk in three positions over the last two weeks. Our inclination is to hold our remaining positions through any corrective phase since the longer-term outlook has not deteriorated.
One factor playing into the risk reduction decision is the recent trend of relatively weak economic data, which is reflected in the Citigroup Economic Surprise Index below (see blue line on right side of chart).
