Whether you know it or not, we’re all exposed to risk from the financials sector (think big banks, GE, etc).
And when I look across the positions in my portfolio, I have significant open exposure on the long side of the market.
This is top of mind for me right now, coming out of our weekly team call. The recent sloppy market action, with no real expansion of new highs, is opening the door — if ever so slightly — for the bull market doubts to creep in. We are certainly not making a “Top” call here by any means, but we are observing that the risks of a potential correction appear to be increasing.
So, while we don’t need to get aggressive with short bets here, it might be prudent to start exploring some bearish setups and keep our eyes and minds open for opportunities to get tactically short in names and sectors that would likely lead on the downside if the broader markets were to stumble here. And we can do this without exposing our portfolio to too much risk, thanks to the existence of long exposure already on the books. [Read more…]