I recently wrote an article that described the three reasons why I believe that we will see at least short-term stability in bonds as a result of technical and fundamental support. However, there is still a great deal of turmoil that may be lurking if the Fed does decide to taper their asset purchases in September.
I am keeping my bond exposure very short in duration with a slant towards high yield and floating rate note funds that have outperformed. Underperforming bond sectors that I am avoiding right now are emerging market, municipal, and TIPs positions.
Gold: Pause for Applause
While there are numerous fundamental reasons for owning gold that can be debated ad nauseum, I have always taken a more balanced and technical approach to owning the precious metal. Back in June I predicted that the SPDR Gold Shares (GLD) was getting oversold due in large part because of the tremendous pessimism surrounding its downward spiral. Since that time, GLD has rallied nearly 20% from its low.
GLD as now regained several key technical levels and is in a strong up-trend, which has been due in large part to a weaker US dollar and strong foreign demand. In addition, gold bullion typically acts well during times of global turmoil as a flight to quality instrument.
Despite its harried momentum, I would not be surprised to see GLD take a breather at this point. We may see some backing and filling that will work off some of the overbought indicators and allow for systemic buyers to return to this sector. Short-term traders should consider taking some profits off the table at this juncture and looking to use additional weakness to their advantage. Ultimately I think that a minor correction in gold will be a healthy and constructive event to continue its upward progress.
The Final Word
As you are flipping burgers or hot dogs on the grill this Labor Day weekend, be sure to spend some time giving thanks to the little things in life that make you happy. Without our friends, family, and health, none of this investing game really matters.
But when you return from the long holiday, consider the opportunities and risks that we are presented with for the remainder of the year and position your portfolio to benefit from these trends. You will likely sleep better at night knowing that you are making proactive changes to enhance your returns no matter how the next four months play out.
David Fabian is the chief operating officer at Fabian Capital Management LLC.