When the best advice is to do nothing

The decision to flip the portfolios to a net long worked in our favour as the all share rallied 4,5% last week. This was fuelled by the stronger-than-expected non-farm payroll numbers on Friday which pushed the indices to finish the week nicely on their highs.

After a dismal August — investors were battered with bad number after bad number — it’s good to see some positive data. Some would say we had bad number fatigue as traders refused to even be in the market and when the bad economic data stopped the market selling off, we knew that most of the news was now in the price.

Unfortunately, those looking for some excitement this week are going to be disappointed. We do have the local MPC meeting happening at which a 50 point reduction in the repo rate is expected, which should provide some activity. But we had the Labour Day holiday in the United States on Monday and we have the Jewish New Year celebrations at the end of the week.

We saw a 30% reduction in volume traded on Monday, which doesn’t bode well for volatility. In fact, the VIX Index, which we use a as a gauge for risk appetite, closed at 21%, which is getting near cheap levels.

I guess the prudent thing to do is to sit in cash. We are slightly biased on the long side, but sometimes the best trade you can do is no trade and this is precisely what we intend doing this week.


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