Yesterday, the stock market rally suffered its worst drop in a single trading session in months, after several voices warned of a bubble in recent days. Leading the sell-off were major technology stocks, including Apple, Microsoft, Tesla and Amazon.

Apparently, some investors suddenly decided to rotate their profits into other assets after the U.S. stock markets had just recently reached frivolous new highs.

The crash came as usual without a clear external catalyst, as the newly released unemployment data turned out better than expected and developments around a coronavirus vaccine are also increasingly promising.

Most of the signs cautiously point to an economic recovery, but there are still many obstacles to overcome before the end of the year: Uncertainty about economic stimuli, budget negotiations and the presidential election in the US. The coming months may therefore be a bumpy ride.

All our strategies also took unusual hits with -9.7% in Pro, -6.4% in MiniMax and -1.3% in Universal.

Back in April I calculated the following circuit-breaker thresholds for a single day loss as a potential sign of further sell-offs: Pro -8%, MiniMax -5%, Universal -1.5%

So technically both Pro and MiniMax hit the level of these circuit breakers suggesting to sell all assets and stay in cash for the rest of the month.

In the past, this approach sometimes helped mitigate larger short-term drops but always reduced the performance over the longer run.

Looking at the different sell-offs in the recent months, there is in fact a fair risk to see another 2-3 similarly negative sessions within the coming week potentially leading to a comparable overall drop as in March. On the other hand there is also a chance to break even by the end of the month.

Unfortunately I have no crystal ball, so it’s really up to you to decide.

On my end I will stick to the plan and wait and see for better or for worse…

Stay happy, healthy and wealthy!

Omar