A Hawkish Mispricing
Hello All,
To jump straight into it, it’s yet again been another week characterized by a continuation of the recent momentum unwind within the overall AI trade, which in turn has dispersed capital elsewhere, although today’s weakness more specifically was broad due to a flare-up in geopolitical tensions in the Middle East between the U.S. & Iran.
On the week, of the major indices, Spooz is the best performer, although it’s practically flat, whereas Small Caps are the worst-performing index, currently lower by just over 130bps.
For anyone who wants to follow an actively managed portfolio in real time:
I’ve joined Plutus as the cleanest, day-to-day way to track an actively managed portfolio in real time. It’s a live dashboard that’s broader, more diversified, actively managed by me, & updated continuously.
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Earlier in 2024, we launched a series titled Educational Pieces, covering a wide range of topics, many of which were suggested directly by you all (4-Part Series).
For those who may have missed the first installment, it covered topics including:
General background / knowledge on all option strategies
In-depth talk on risk / reversals & how to go about expressing / utilizing them
Options Structuring
When to used naked calls / puts vs. spreads
Choosing expiration dates
Identifying key pivots / supports / resistance zones
General briefing on stock gaps
What to look for in regards to fundamentals
Implementing fundamental / macro / technicals into a trade
Hedging
Creating risk/reward setups
Taking profits / managing losses
Overall Process
Book recommendations
A link to the original Educational Piece can be found here .
Given the positive feedback and how useful many of you found the first installment, we followed up with Educational Piece: Part Deux earlier in 2025 & for those who may have missed, a link to the piece can be found here & we then went on to release Educational Piece: Part Trois which can be found here.
And finally, the most recent installment, Educational Piece: Part Quatre, can be found here.
‘Risk management is the silent prerequisite for compounding & true wealth is built not by chasing the highest returns but by ensuring the survival necessary to realize them.’
Before we jump into the recap, in looking at the week thus far, despite the mixed index-level action, especially given the continued unwind within momentum / the overall AI trade, Growth is still the best-performing factor on the week, whereas the worst-performing factors are Small Cap Value along with Private Equity.
And in regard to the specific factors and or ‘baskets’ we’ve built on Plutus, here are the best performers year-to-date:
1. Industrial and Auto Analog Recovery
2. Rebuilding U.S. Industrial Sovereignty
4. Mission Critical Security Stack
5. Robotics
Whereas on the flip side, the worst performing baskets year-to-date have been:
Moving along, again, the action on the week, along with these past couple of weeks, has mostly been characterized by the escalation of the recent momentum unwind, which in turn has helped capital disperse elsewhere, leading to an overall pickup in upside participation. But despite indices remaining just marginally off their highs, along with the recent expansion in breadth, just 50% of stocks remain above their 20D, which in the shorter term isn’t necessarily an overbought or oversold signal, but instead leans more neutral.
And similar can be said on a broader timeframe too, as currently just 55% of stocks remain above their 50D, which also paints a more neutral picture and isn’t necessarily signaling either overbought or oversold conditions in the medium term.
That said, despite indices sitting just off their highs, with the Q’s more specifically only in a mild pullback (-5%), the Fear & Greed Index is currently sitting in 'Fear' territory, which again emphasizes that markets remain far from true euphoria or the type of positioning extremes typically associated with major & or interim tops (more on this later).
Historical context of the Fear-Greed Index overlaid with the S&P:
