Given the markets recent propensity for rewarding what has been working with only minor shifts in volatility along the way, there is a better than even chance that investors have become somewhat lackadaisical in their attitude towards risk. This can lead to sudden expansions of volatility, such as what is being experienced in the SaaS sector today as a very simple, micro example.
Trends in the markets are not all built the same way. There are trends in the market that while proving profitable can also blow up in an investors face very quickly, leaving only those with a hairpin trigger attitude towards risk with all limbs intact.
Understanding this simple fact, the most reasonable question to ask is which trends should be participated in and which should be avoided as we are entering the historically turbulent August-October period of trading?
The answer, per the usual, is exceptionally simple. Unless you enjoy gut wrenching portfolio volatility, high beta names should be avoided until a risk reset takes place. There are investors who are hoping to catch up from missing the entire first half bull market of 2019 who have hopped onboard the high beta technology train in an effort to make up for opportunity lost. It's a virtual guarantee that the markets will apply a camel clutch to these investors until they tap out at some point in the near future.
There is nothing more loathsome to the market gods than investors who fail to look fear in its eyes, missing opportunities to buy when it is the most uncomfortable (think December and January 2019), instead opting to wait until its a warm and fuzzy environment, supported by fundamental data that's favorable with friends discussing how great their portfolios are doing.
Markets lash out against such displays of cowardice in often violent ways. Understanding that these character traits are inherent within financial markets, at times like this investors would be well-suited to maintain a bullish posture while turning their attention to less volatile ways of cultivating market gains.
Zenolytics has recently been pounding the table on financials as one way of taking advantage. Public private equity giants, such as KKR, continue to look appealing. And if you're still hungry for conservative beta then single family residential reits, such as INVH, look promising.
There will be a time to go full Rambo into high beta again this year. Right now just isn't that time.
