June 4th 2021
North American and European stock markets closed moderately higher in a shortened trading week (with markets closed in the U.S. last Monday in observance of Memorial Day), while Asia Pacific stock markets were mixed. Last week, the S&P and DJIA rose 0.6%, our 50/50 Nasdaq/Russell benchmark was flat, and Asia Pacific stock markets finished the week with losses around 0.5%, except for India which gained 1.3%. Our BSD Global Tech Hedge Fund advanced 0.2% last week. The most important data point in the past week, was the softer U.S. non-farm payroll print which dialed back some of the market’s taper expectations and the sluggish data suggests the Fed can continue to be patient and remain highly accommodative. The meme frenzy grabbed headlines this past week, and some strategists fear it is a sign of a bubble building in the stock market. Energy was the top performer among major sectors as oil prices bubbled up.
Now the CPI report is the next point of focus (with the U.S. May CPI reading to be announced this Thursday), ahead of the Fed’s June 15-16 meeting. The question is, will it be so hot that the central bank may have to reassess its view about the temporary nature of inflation, or could it show that price increases are peaking? The market has been expecting the Fed to begin to talk about unwinding its bond buying later this year, with many strategists targeting the Fed’s Jackson Hole, Wyoming, symposium at the end of August. The Fed is expected to first discuss cutting back its purchases months ahead of taking action. Then it will slowly reduce its buying. After that, it could consider interest rate hikes, now not expected by the market until 2023.
Your BSD Global Tech Hedge Fund is 90% invested across a couple dozen tech vendors and tech end-users, with a 46% short equity indice hedge that will incrementally grow (from the laddered Nasdaq put options strategy) if the market deteriorates.