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Limited Upside for Risk Assets

Limited Upside for Risk Assets

December 07, 2021

Key Takeaway

Our indicators continue to suggest a moderate exposure to risk over the short-term, although we are likely to take a more cautious approach heading into the new year. So far, we raised some cash in tactical portfolios given technical breakdowns on the individual stock level. We will gradually rotate cash into a neutral benchmark position. This strategy will help reduce overall risk while concentrating on specific areas of outperformance. 

For now, the S&P 500 is holding support around $4,500. Some of our short-term indicators are approaching oversold conditions, similar to what occurred in late-September before a price bounce. Still, the uptrend continues to narrow, and we noticed some overbought conditions in the S&P 500/long-term bond ratio (SPY/TLT), which could trigger a more defensive tone going forward.

S&P 500 (SPY) / Long-Term Bond (TLT) Ratio

´╗┐Source: Cannon Advisors, TradingView data