Technically, we have reached levels where the stock market can pull back or consolidate its gains. The S&P 500 should struggle around its 2019 highs (3025), which also coincides with the 200-day moving average. The Dow and Russell 2000 are nearly completing the key 61.8 percent retracement objective. And Nasdaq has “filled” all the breakaway gaps, a common occurrence after a crash. We also happen to be entering the weakest period seasonally for stocks, historically.

We are exiting all our long equity positions today, long High Yield and EM debt, long dollar (versus SGD and KRW), and Bitcoin. We believe it makes sense to pivot to a defensive posture for the next few weeks and months. To be clear, we remain bullish over the medium-term and do not expect to revisit the March lows. We just intend on shuffling our portfolio completely and moving into some company-specific opportunities when the correction ends.  

For now, we are initiating the following short positions: short Apollo Group (APO), short Carlyle Group (CG), short KKR (KKR)—each at 3% of NAV; short Russell 2000 (IWM), short Energy stocks (XLE), and short Emerging Markets (EEM)—each at 10% of NAV.