Here’s How To Approach The Market As S&P 3,000 Is About To Set Off A Wave Of FOMO
The S&P 500 is about to deliver itself into a resistance nightmare with a move over 3,000. While investors celebrate this neat round number in the days ahead, with new record highs for the S&P, they should also be aware that the attention magnet neat round numbers attract around new highs doesn't necessarily go well with brick walls of historical resistance. Let's be clear here: Resistance and growing optimism in the face of round numbers and record highs does not equate to auto-bear mode. It simply means that investors shouldn't fall into the trap of automatically hitting the max allocation button if they have been underinvested recently. There are a lot of investors who missed this rally and are looking for a decent spot to get involved. What happens when S&P 3000 hits, CNBC has a scrolling "NEW RECORD HIGHS" with an animation of a bull riding a flag draped rocket to Jupiter and Mr. Underallocated Investor sees his neighbor is building a 3,000 square foot, mahogany laced dog house as an addition to his home? Panic buying. The buy button is about to be hit across Wall Street, which may continue this surge a bit longer. However, the fear of missing out on a trade is rarely the one you want to get involved in as an investor. Especially when its occurring around resistance that will create excessive volatility and a terrifically terrible risk/reward trade overall. All of those investors who missed out on allocating to equities when they should of are about to be hit with a massive dose of "I can't take the FOMO any longer." So here's what to do in each circumstance: If underallocated - Be selective in getting involved here. Financials are a good choice to start. They have room. Stay away from high momentum growth or anything else that has the potential to keep you up at night when the volatility equation gets turned on its head. You have the next couple months to allocate in the right spots before the market really gets moving past resistance. If overallocated/leveraged - Take profits selectively. As discussed, no reason to go into auto-bear mode. No reason to add here either. You've done well. Don't ruin it by becoming a pig. If evenly-allocated (defined as 75% or so exposure to equities) - You have to move to 100% exposure in the next couple of months. The 25% with a negative real yield has a very real opportunity cost. Mix up the allocation with tech and financials. Do it slowly through July and August in an opportunistic, deliberate manner. Have a happy 4th. Zenolytics...
The Bullish Nature Of The Blackstone/KKR Connection
KKR has been discussed here extensively over the years. In 2018, Zenolytics described KKR as a "long term compounder." Most recently, certain dynamics on both a macro and micro basis forced further discussion of the potential for the investment, as KKR was recommended again for conservative portfolios. One of the dynamics that will continue to fuel KKR on the upside in the near to intermediate term is that BX (Blackstone) continues to ride a wave of investor driven fury to the upside following news that they are converting from a partnership to a corporate structure. This has numerous advantages for Blackstone, both tax related and otherwise. However, one of the key advantages when it comes to share price is that conversion to a corporate structure allows for all kinds of institutional participation that wouldn't otherwise be possible when being a K-1 totting partnership. Blackstone has ridden the wave of new investor participation to what is commonly known on Wall Street as a "value unlocking" appreciation in share price. This value unlock in shares of Blackstone, which was terrifically undervalued prior to the conversion, has no end in sight as the piling into private equity leaders who are collecting fees from return hungry investors worldwide is only at mid-stride presently. To be sure, private equity has a special place in the current economy with low rates, return hungry investors and deals being flipped back and forth in as fluid a manner as anytime over the past decade. Bringing us to KKR. The boys over at Kohlberg, Kravis, Roberts & Co. benefit not just from the favorable economic landscape for private equity, but the lustful manner in which investors are chasing its primary rival Blackstone. That lust will naturally spill over to shares of KKR. In fact, they already have, as KKR shares hit a 10 month high yesterday. Perhaps more importantly, the multiple factors working in favor of private equity here with the added bonus of Blackstone suddenly being a favorite among investors creates a margin of safety in KKR that only further bolsters its positive attributes as an investment in the financial space. Margin of safety.... Check. Momentum in the sector.... Check. Outstanding fundamental backdrop.... Check. KKR remains a buy with a near-term target of $30. Zenolytics now offers Turning Points and ETF Pro premium service Click here for details. Disclaimer This website is for informational purposes only and does not constitute a complete description of our investment advisory services. No information contained on this website constitutes investment advice. This website should not be considered a solicitation, offer or recommendation for the purchase or sale of...