Staying above the turmoil is easier said than done for investors these days.
The calm that settled on global markets after the Bank of England’s unprecedented intervention to shore up U.K. bonds seems to be fading, with stock futures in the red and a risk-averse mood building for Thursday.
It’s hard to find a big money manager who isn’t worried out there, amid fears of the Fed “breaking something” as inflation soars and Europe’s energy crisis worsens.
With central banks — the BoE being a current exception — no longer providing liquidity support to markets, investors now need to be more nimble if they hope to preserve their capital, or even wring some alpha out of their portfolios.
That’s the message from Stock Traders Daily and portfolio manager at Equity Logic, Thomas H. Kee Jr., who in our call of the day says they must learn or relearn one vital skill to survive these turbulent times.
“Unfortunately, many in today’s market have completely forgotten how to manage risk, and over the past decade the FOMC has dissuaded Wall Street from being concerned about risk,” Kee said in a recent post, which he discussed with MarketWatch in an interview.
In short, some investors have mastered the art of not managing risk at all, said Kee. And managing risk has been a core part of his Stock Traders Daily strategies from the internet bubble’s peak through during a decade of stimulus. Since 2000, he notes, “some of the most opportune times have come during times of widespread fear in the market.”
At its heart, risk management “both reduces the temptations that come with greed, and the stress that comes with the fear cycles,” letting investing flow through economic and market upheaval, said Kee.
So how to not be at the mercy of markets and fear? For starters, forget about that buy and hold strategy, said the portfolio manager, who has long used a strategy of alternating between cash and the highly liquid SPDR S&P 500 ETF
SPY.
He highlights his Stock of the Week strategy as an option for retail investors, who can be more nimble than the bigger institutions that have too much money to move around.
“The approach is to trade one stock every week, according to a trading plan that is designed to go with the expected flow of the market in the week ahead. The correlation factor is important, but the risk controls involved in the trading plans are traditional. They are normal stop losses, but what is not normal is that this strategy also ends every week in cash,” explains Kee.
That means investors can take a “nap” from market exposure over the weekend, as the strategy objective is to trade one stock every week, and end every week in
cash.
And using turbulent environments to an investor’s advantage has also worked for him when it comes to one cornerstone stock. Kee bought Apple
AAPL
in May, then sold it in near the highs in mid-August along with Invesco QQQ
QQQ,
an exchange-traded fund (ETF) that tracks the Nasdaq-100 Index, in mid-August.
He has been back buying Apple, which had a rough day on Wednesday amid reports of slowing demand for its newest models.
He says investors need to look for stocks that can “withstand good and bad times,” he said. “Apple is a bellwether and you don’t want to mess with lower quality stocks in conditions like this,” he said, adding that because of its quality, the stock can be held for a month or two.
Read: Apple and Tesla are the ‘last bastions of hope’ for retail investors, say these analysts
The markets
Stock futures
ES00
NQ00
are under pressure as bond yields
BX:TMUBMUSD02Y
BX:TMUBMUSD10Y
resume their march higher, along with the dollar
DXY,
which is putting pressure on the pound
GBPUSD
and euro
EURUSD.
U.K. government bond yields
BX:TMBMKGB-10Y,
at the heart of Wednesday’s financial storm, are creeping up again. Oil
CL
and gold
GC00
prices are dropping.
Watch the yuan
USDCNY
as China state banks have reportedly been told to stock up on the currency for intervention.
The buzz
Trapped in their homes and 2 million without power. The digging out from one of the strongest hurricanes to ever hit the U.S. begins in Florida.
Weekly jobless claims and a revision to second-quarter GDP are due ahead of the markets open. We’ll also hear from St. Louis Fed President James Bullard and San Francisco Pres. Mary Daly.
Semiconductor group Micron Technology
MU
and sportswear maker Nike
NKE
will both report after the market close.
Warren Buffett’s Berkshire Hathaway
BRK
bought another 6 million shares of Occidental Petroleum
OXY,
according to a new filing.
Shares in luxury auto maker Porsche
DE:P911
edged higher in its trading debut, after pricing its IPO at the top end of the range.
No apologies. In her first comments since the U.K. government’s tax-cut plans sparked market upheaval, Prime Minister Liz Truss has been playing defense. Alarmed U.S. and IMF officials have reportedly been putting pressure on her government.
Opinion: BoE surprise move was smart – but government still faces big challenges
Best of the web
A long-shot option trade from the show ‘Industry’ would have paid off Wednesday
The charts
From the “how bad is it” department…
The tickers
These were the top-searched tickers on MarketWatch as of 6 a.m. Eastern:
| Ticker | Security name |
| GME | GameStop |
| TSLA | Tesla |
| AMC | AMC Entertainment |
| AAPL | Apple |
| BBBY | Bed Bath & Beyond |
| APE | AMC Entertainment preferred shares |
| NIO | NIO |
| AMZN | Amazon |
| TWTR | |
| DWAC | Digital World Acquisition Corp. |
Random reads
President Joe Biden accidentally called out for a dead Congresswoman
Former U.K. soccer player drafted into the Russian army.
Dogs can smell your stress
Rapper Coolio, of “Gangsta’s Paradise,” has died aged 59.
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