September 20, 2020
Well, it was looking like a positive week. After two strong days for the S&P 500, Wednesday was looking like a third positive day as the equity market was poised to put the sharp declines of the first two weeks of September behind it. All we had to do Wednesday was get through the Fed at 2 PM, and then it would be smooth sailing. When the Fed released its statement at 2 PM Wednesday, the market initially rallied. So far, so good. But then Chairman Powell stepped up to the podium. True to form, within 15 minutes of the start of Powell’s press conference, the S&P 500 made its high for the day and ultimately the week. By Friday, any hopes for gains this week were a distant memory. Chairman Powell may go down as the scapegoat for this week’s sell-off, but there was nothing really new in the Fed’s statement. Some have suggested that the Fed wasn’t dovish enough in its comments, but that’s a bit of a stretch. We would put more weight on the fact that the calendar says September than anything the FOMC said. For the week, the Dow was flat, the S&P retreated by 0.7%, while our 50/50 Nasdaq/Russell benchmark gained 1.04%. European bourses, on average, advanced either side of 1%, and Asia Pacific stock markets once again diverged (with the mainland Chinese stock market surging 2.4% while the Japanese stock markets slipped 0.2%). Your BSD Global Tech Hedge Fund rose 0.07% last week. We have positioned the BSD Global Tech Hedge Fund with the expectation of more market volatility; the Fund is 80% invested across a couple dozen tech vendors and tech end-users, with a 70% short equity indice hedge that will incrementally grow if the market deteriorates. Our BSD Global Tech Hedge Fund will be protected from significant market drawdowns, but if global stock markets continue to defy the ‘actual economy’ and climb higher, we will marginally participate in those gains. We’re still up over 21% year-to-date, versus +2.75% for the S&P 500 and +5.8% for the 50/50 Nasdaq/Russell benchmark.
In the week ahead, stocks could continue to be volatile, but investors are likely to try to buy the dip in some favourite tech names. Market participants will be watching Fed Chairman Powell and Treasury Secretary Mnuchin when they appear before Congress to report on coronavirus aid this week. Investors are also increasingly looking to the November election and worry there could be an uncertain outcome, as states deal with large amounts of mailed ballots for the first time; the concern is it could take weeks or months to determine the outcome if the race is close.