InvestNow News – 19th June – Milford – What’s behind this market sell-off?

June 12 – William Curtayne – Portfolio Manager

The US major equity indices were off over 5% today in largest daily fall since March. The question on everyone minds is whether we are heading back to the lows or if this is a chance to buy.

Why has the market sold off?

News agencies and market commentators will be quick to point to some news event that has caused this move. But these moves are caused as much – or even more so – by investor sentiment and positioning.

The market rally since March was against incredibly poor economic data as investors were already bearishly predisposed and cautiously positioned. This meant the market reacted to the positive developments of improving virus cases and reopening economies rather than longer-term risks such as sluggish economic recovery or the possibility of a virus second wave.

After a 44% rally by the S&P 500 from 23 March to 8 June, it is obvious the broader market is more positively positioned than a couple of months ago. But within this some investor groups are positioned extremely bullishly, betting on the market rally to continue, while others retain a fair amount of conservatism.

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