Axis Tactics 10th March, 2025 - Is the Bull Market Dented or Broken. Interim Comment

Interim Comment further to Today's Market Fall across the S&P 500 Index and Nasdaq 100, inter alia.

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Bull Market? Not today…..

Regular readers and viewers will know that we have been very sceptical and borderline insulting about the investment philosophy of buying US Tech and Fashionable Segments.

Nvidia is over 50% down from it’s high

Novo Nordisk has almost halved

AMD has lost over 60% from it’s high

There are many examples of this, both in the current market and prior periods of market correction. We have advised investors, repeatedly, to be cautious of and to preferably avoid completely, all such over-valued (in our opinion) names.

Our approach to Safety, Portfolio Protection and Generational Estate Planning Strategy & Capital Preservation have been supported by 2 key attributes:-

1. A recognition of how and where to position portfolios in light of Volatility and Market Risk.

2. For Durable, Long Term Capital Appreciation : A Bias towards Assets, Properties, Bonds & Equities where both the valuation credentials and credit-worthiness are identifiable and prudent.

Most of our readers and viewers do not engage in short selling and only a certain type of investor typically engages in the usage of derivatives. This is with the exception of covered call writes - which can often enhance yield for even the most cautious investor.

However, yet again, a look beyond the cash markets is where many of the risk levels and break-points in modern markets lie. So, even if you are very risk-averse and have no appetite at all for such exotic instruments, we encourage you to consider the clues that we offer when analysing these trading dynamics. These clues informed us and prepared us to take the following range of pre-emptive actions for our Investors:-

(Ranging from more conservative courses of action, to the more adventurous)

1. Take Profits on any securities that had previously moved sharply upwards, relatively quickly

2. Raise cash to take advantage of future buying opportunities at more attractive prices

3. Rebalance Sector Allocations : Reduce Tech/US Core, Buy EU/HealthCare/Utilities/Real Estate

4. Hedge some downside risk and/or Reduce Equity Weighting and Increase Bonds/Cash/Precious Metals

5. Use VIX, Index Futures and Options to :

   (a) Completely neutralise all potential downside risk; or

   (b) Speculate with a view to profiting from the Correction; or

   (c) Speculating on the fall in value of Overpriced “Fad” stocks using Put Options, Sector Futures, ETFs, and/or CFDs.

For anyone that likes the idea of 4b :-

The VIX Volatility Index was up 20% today (unleveraged) and 66% in the last couple of weeks.

Using typical exchange margin, those figures translate to returns of 100% intra-day and 330% over the last 3 weeks.

As our readers will know, we named this VIX/Volatility trading activity as a core part of our 2025 Strategic Outlook and we naturally participated in these moves above.

Our frequent warnings to be prepared for higher volatility and a re-set on the valuation of high-priced US Tech came home to roost - but there were and still are actionable steps that are open to all types of Investor. So far the Index damage, relative to the huge gain over the last 2 years, isn’t critical. There is still time and space to re-assess and plan for the next phase of market activity.

Broken Bull Run or simply a Speed Bump?

The S&P 500 has, for the last few years, bounced back from these sharp corrections. From a simple study (below), we are at a rough level from which there is often a bounce:-

Separately, there are several other technical levels which have been severely breached. So, while there is a moderately high probability of a bounce, in order for it to be a live version rather than the ‘dead-cat’ variety, US Tariff policy has to find a way to avoid sending the US into recession and hence change the mood music completely. The Trump administration seems more concerned with the US 10 Year Bond Yield (which fell ~10bp and US Treasury Secretary Bessent will rather like that - cheaper mortgages, cheaper loans for Main St) rather than the US Stock Market, so there may not be a high level of intervention or policy shift in the event of further market declines.

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