How I Avoided Friday’s Market Collapse

Corona variant

I’m taking a quick break from my vacation to drop you a note about what’s happening in the market today. As you likely know, a new COVID-19 variant has emerged in South Africa. Scientists are concerned that this new variant could be vaccine-resistant and more intense than the recent wave of Delta. As a result, European nations have started to stop flights from South Africa to slow the spread of the variant.

Following this development, markets cratered. Bitcoin (CCC:BTC-USD) slumped 7.5%, oil prices pulled back more than 10%, and tech stocks are being routed. Of course, if you’ve been following me here at Haven Investment Letter, you would know that market momentum went red last Friday. This is critical.

I advocated that people move toward cash ahead of this holiday weekend. This wasn’t a gut check. This was following real numbers and real data to avoid significant selling in the market. I anticipate that today’s selloff will accelerate a bit on Monday because anyone who didn’t panic sell on Friday will likely do so in the early hours when we return next week. 

The markets have sought a reason to sell off over the last few months. Valuations are extremely stretched. The markets haven’t correlated at all to an economy that appears to be slowing. And we are witnessing a significant amount of leverage leave the markets. This is the type of day that we see margin calls, which can fuel additional selling as funds move to liquidate positions to cover their overextension to risk.

The big question that people want to ask: “Is today’s selloff a buying opportunity?” I don’t believe so. At least right now. This variant will require greater examination. If we see increased lockdowns, we’re not talking about oil prices falling to $70. We’re talking about oil at $60 or even $55. 

We’re talking about an extensive run-on shut-in stocks and increased volatility for the hospitality and travel sectors. And we’re talking about the possibility of EVEN MORE Fed intervention. We will wait for momentum to return to the markets before diving back into the pool. Then, we’re simply going to bide our time and enjoy the holiday weekend. 

When you’re sitting in cash and holding all the cards with a sound momentum system, you set the rules. I’ll be looking to deploy cash as soon as next week. And this could look more like December 2018 than March 2020. But, remember, buying opportunities will emerge. They always do. Let’s be patient.

Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.
Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.

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