Melting Icecream - Melt Up

Melt-Up, Shmelt-Up | 5 July 2020

Investors have sauntered out on the tightrope of the risk curve as the Fed commits to supply liquidity to the markets. While employment numbers bested all expectations, they will likely stay stubbornly high through this new chapter of economic history.

As we enter a bullish regime, a market melt-up may retest June highs. Fundamental headwinds will likely slow the expected recovery to earnings. With ample liquidity from the Fed, we expect the environment to remain favorable for risk assets, particularly stocks.

The objective for advisors remains the same: protect client capital, rescue from risk, and try to emerge unscathed.

Market participants have embraced the quick rise so eagerly that even those unaware of the melt-up are attempting to profit, exposing themselves to tremendous downside in the process. Trading volume and volatility are important indicators, and as market concentration rises, finding informational inefficiencies gains importance.

We’re not here to predict the future, but to frame the rally. FOMO on lower bond yields seems to be setting the mood of the market. Only time will tell if the optimism of this rally hides inherent risks.

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Best,

John DiBenedetto and the Portformer Team

John DiBenedetto

Sales | Business Development | Customer Success

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