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Markets are shaking, what to do?

Markets are shaking, what to do? In the past week we have suffered a nice retracement of the stock markets with particular strength on the Nasdaq index, which lost several percentage points causing many to fear the coming of the end. Today the same index is showing the first signs of strength, perhaps due in part to the fact that over the weekend the House of Representatives approved the first aid plan decided upon by newly elected President Joe Biden. The floor will now go to the Senate, which will most likely approve the maneuver.

What can this tell us?

During 2020, every stimulus injected into the market by the FED led markets to rise consistently, with many indexes hitting new all-time highs. Could things be different this time? Perhaps. Why? Inflationary tension seems to be beginning to be felt. U.S. Treasuries last week saw a sharp rise in yields, which means investors are starting to sell bonds in likely anticipation of a future, but not too distant, rate hike.

The paths then may be two in this case. Either investors see the aid plan as a new input to be able to drive markets upward, or they see this stimulus as a danger to inflation resulting in a weakening of stock markets. Of course, time will tell. For the moment, the market seems to have held up well from last week’s shock, but you know, with such volatility anything is possible.

So if the markets are shaking, what to do?

In the case of a worst-case scenario, then, who might lose out the most? Perhaps technology stocks, while banking and industrial stocks as well as commodities could benefit . Good diversification is thus the basis of an efficient portfolio that can partially shield itself from heavy market shocks. I do not think it is yet time to liquidate all positions, but I will be ready to change my mind in the coming sessions if certain conditions occur. You can follow us on our free telegram group or sign up for one of our premium services with all our real-time analysis.

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