US stocks reenact the nightmare of 2022, risk-off sentiment spreadsđą
With US stocks selling off another 1% yesterday, the correlated sell-offs in equites and fixed income have brought back uncomfortable memories of 2022, where risk-parity and classic 60/40 funds suffered one of their worst performances on records. August is shaping up to be the worst month for these conventional strategies YTD, and PNL-management has no doubt been contributing to the wider risk-off move over the past 2 weeks.
From a technical perspective, while we have turned negative since a couple of weeks ago on the technical break in Nasdaq, short-term indicators look somewhat overdone for the SPX, and the risk-reward looks more balanced here, especially considering the consensus and pervasive bearishness in China already. It might make sense to keep risks light and close to home while we wait for more markets to settle down from here.
