Earlier this month, we discussed the upside potential of Bitcoin, gold, and energy – particularly oil – based on the possibility of escalating tensions between warring nations.
Admittedly, I was focused on the Ukraine-Russia conflict rather than Israel-Iran developments, so I wasn’t anticipating the rally would reach the heights it did. Nevertheless, we managed to enter and exit the market in just over a week, capturing a very nice profit.
In a similar vein, both gold and Bitcoin have demonstrated resilience, and despite both assets appearing vulnerable to downside corrections, I wouldn’t suggest abandoning these positions just yet – especially given current global tensions.
I’ve been traveling extensively over the past few months, and this may continue through the summer. Staying on top of every market movement has become challenging, but with low volumes across the board and holiday season approaching, I’m certainly not alone in being cautious with my capital allocation.
Much of my travel has taken me in and out of the UK, which has focused my attention on developments in my homeland. As I mentioned last week, the situation doesn’t look particularly promising. Even though sterling and the FTSE aren’t yet reflecting the underlying problems festering in the UK, these issues must eventually surface.
Regarding Sterling, I’m hoping to see some additional strength in the currency, but as I’ve mentioned previously, somewhere between 1.38 and 1.40, I’ll be looking to short cable.
The reality is this: while I made some money on the oil rally and continue to hold my gold positions (and nervously, some Bitcoin), the geopolitical landscape is making our markets increasingly volatile and treacherous. This is hardly the time to approach trading with a “gung-ho” mentality. Anyone who jumped into oil when it broke above $75 will have understood exactly what I’m talking about when it almost immediately dropped back to $68.
I enjoy analysing the political landscape and have probably written more about political events over the past four years than most capital market analysts. However, at this moment, regardless of how we examine the situation, numerous global developments could instantly shift market direction – even while we are asleep.
Even for someone as naturally pessimistic as myself, we can’t be entirely doom-and-gloom. Indeed, while many may not appreciate Donald Trump, there’s little argument that his economic policies are already showing results. And, provided the world doesn’t go completely off the rails, it’s reasonable to expect this growth trajectory to continue.
What exactly constitutes “going off the rails”?
It’s a prolonged conflict with Iran involving direct American participation. It’s Putin exploiting the Israel-Iran situation to escalate aggression against Ukraine. It’s China using both conflicts as cover to invade Taiwan. These scenarios become particularly concerning when the “peacekeeping” West has depleted its arsenals supporting Zelenski – a situation that should worry everyone except the authoritarian regimes in question.
While we can’t ignore these potential developments, and we all hope our leaders possess enough wisdom and common-sense to keep us out of these conflicts, we simply cannot disregard current events. There’s little point discussing Federal Reserve interest rate policy when such significant uncertainties loom overhead.
From an investment and speculation perspective, we need to maintain defensive positioning and rely on what the charts tell us, rather than making impulsive trading decisions based on the latest media newsflash.
More importantly, entering these markets without defensive stops is currently foolish, unless you are constantly monitoring the markets. Yes, you might experience significant slippage, but that’s far preferable to complete portfolio destruction.
Equity investors will have their own sector preferences, so discussing specific stocks with upside potential seems pointless – especially since I remain unconvinced about the upside potential of many indices.
However, I’ve been examining the commodity space closely and have built a small, long positions in grains, which I might add to if we see further weakness. As mentioned earlier, I continue holding gold along with some Bitcoin, which I’d like to add to on any pullback. In regard to BTC, I’m particularly concerned about the gradual introduction of Central Bank Digital Currencies by the ECB, still scheduled for later this year. But I am also slightly nervous about some of the sizable, long positions that have been built up by a few major institutions, such as Strategy.
Oil will likely feature prominently on many speculators’ buy lists. While I recently captured substantial profits from the recent rally, I’ll let the charts guide my next moves. I won’t be buying unless WTI drops to around the $64 level.
Finally, if you haven’t already, I would suggest monitoring our weekly Chart-book, published each Monday. Over recent months, it has proven quite insightful for market timing and positioning.
The post Navigating Turbulent Markets: A Cautious Approach in Uncertain Times first appeared on JP Fund Services.
The post Navigating Turbulent Markets: A Cautious Approach in Uncertain Times appeared first on JP Fund Services.
The post Navigating Turbulent Markets: A Cautious Approach in Uncertain Times first appeared on trademakers.