How Risk Is Shaping Up To Respond To Earnings and The Elections

There is a definitive argument to be made that the events of the past several months, accelerating into a crescendo of outcomes over the next several days, have suppressed risk to the point that anything but an extreme anomalous circumstance will be greeted with an increase in risk exposure.

As the most immediate example, mega-cap tech earnings for this week will likely be overwhelmingly positive in the eyes of investors as election and interest rate chaos have managed to cap the ability for investors to add risk substantially until a conclusion is reached.

With both the FOMC meeting and elections coming to a conclusion next week, unless there is a surprise outcome, the path of least resistance will remain for investors to continue adding risk.

The only difference will be that with the path of rates becoming further solidified and the elections out of the way, the velocity of those additions will become greater moving forward.

In this past weekend's edition of Zenolytics Turning Points, I made this exact argument, in addition to outlining how, perhaps not coincidentally, the price structure of the major averages is confirming that something significant is afoot.

As such, we removed our short hedge on Monday, being leveraged long at the moment, with Bitcoin related positions constituting our largest area of exposure.

Expect a continued embrace by investors of earnings results as the week progresses, leading into a monumental week to come, where anxiety will be quelled and we can get back to the business of investing for investments sake, without the overwhelming aspect of political noise.


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