Choppy markets

As we go into the weekend, on a modest uplift in vol (with the S&P500 selling off a touch, and Aussie markets weaker after a very strong march) worth keeping in mind the range of expected outcomes for jobs day (non-farm payrolls).

If we get the right tail, here, 1sd, 2sd +ve, yields will likely hit 4.5%, in the US, and that’ll cause markets to sell-off further.

It doesn’t change the backdrop for us, overmuch. We are already moderately defensively positioned, and, whilst we’d like all assets to go up, the reality is when they go down you get to average into cheaper units, and that’s fine for the long run. There’s always low-to-negative correlation assets to monetise, cash balances to draw down on.

The above is really just an extension of what we’ve been talking about in some of our recent investment committees and client events. There’s no real way we could expect the next 3 or 6 months to look like the last 3 or 6 months. A-REITs were up over 30%, international equities well into double digit territory, and, pretty much everything made money.

So, it’s just a reminder that volatility is to be expected, turbulence is to be expected, sometimes data prints (like tonights jobs data) hold a bit more significance than normal, and, that’s all okay. Pullbacks are healthy, and part and parcel of the game.

Should we get the expected outcome, or something a little to the left (i.e., a weaker print) things will trundle along. If we get the extreme left outcome, which is just very unlikely given the stronger ISM/PMI and GDP nowcast data, yields will head back towards 4%, although it’s likely there’d still be some profit taking weighing on the broader equity market.

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