Market Pulse: A Week for Policy Making

By Ardi Aaziznia  |  
Bi-Weekly Market Updates  |  
Dec 14, 2021
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Hello All,

Welcome to 2021’s last newsletter. This is a very important week given Tuesday and Wednesday’s Fed meeting. Aside from that, we are seeing continued pressure on higher valuation stocks as well as inflow back into utilities, staples, and other defensive sectors. It is so critical to be running a long and short portfolio of stocks in order to be able to capitalize from this divergence.

The Big Picture

When all is said and done, there is definitely an increased probability for an earlier rate hike than what was initially thought. By looking at the spot rate of discount T-bills, you can discern that the first hike might come as early as March.

Rate hikes are accelerating across the G20, with the US being the only major economy to not yet announce one.

If rate hikes are implemented at a faster pace than had been expected, they could certainly act as a catalyst for the banks and the financial sector.

Option Trades for the Week

I set up many trades this week so that I could run a long and short book in order to hedge my delta against elevated volatility. I am still positive delta, which means more pain for me on days when the market is down. However, as you can see, to balance this volatility regime, I try to have options with different durations in addition to a mix of long and short.

Tweet of the Week

My tweet of the week is from Joe Weisenthal, columnist and co-host of Bloomberg’s Odd Lots Podcast (which, by the way, I highly recommend). While many people talk about the market on Twitter, the truth is that many of them have no idea what they are talking about. What follows is a tweet from Joe Weisenthal schooling David Sacks (the venture capital and SaaS guy) on some not-so-distant history lesson.

As always, please do not hesitate to reach out to me should you have any questions.

Ardi

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