By Barbara Kollmeyer, MarketWatch
We’re still a day away from the U.S. Fourth of July holiday, but fireworks are already lighting up some markets.
Investors are scooping up bonds — on hopes central banks won’t be hiking interest rates soon (see chart) — as well as gold and global equities, having driven the S&P 500 to a new record on Tuesday. That action has been labeled the “buy everything” trade by some market players.
Among the fans are James Whelan, investment manager at VFS Group Global Macro Fund. Providing our call of the day he says he’s ready to cash in on some of those “buy everything” gains ahead of a big near-term risk.
The Sydney, Australia-based Whelan told MarketWatch in an interview that the coming second-quarter U.S. earnings season will be a big test for markets, a view we’ve been hearing a lot lately. Like others, he’s braced to hear whether global trade tensions have hurt U.S. businesses.
“We might be calling it the ‘burnings season,’ as it could be a lot of long positions that get burned,” he said, in reference to how upbeat investors have been up to this point on many assets.
Whelan said he started getting bullish in May on emerging market currencies, gold, and most equities outside of Europe, notably global momentum stocks via the iShares Edge MSCI World Momentum Factor exchange-traded fund /zigman2/quotes/208002491/delayed CH:IWMO +1.39% . The fund offers a play on equities that have been trending higher, such as Amazon /zigman2/quotes/210331248/composite AMZN -2.78% , Microsoft /zigman2/quotes/207732364/composite MSFT -1.05% and Visa /zigman2/quotes/203660239/composite V -0.95% .
The money manager predicts other big investors may back away from markets sooner, given the “perfect storm” of a shortened U.S. trading week and those looming company results. Naturally others may follow, triggering more losses, he says.
Another risk is a blackout period coming up for company buybacks, something that has helped propped up equities for decades, he said.
Whelan said investors will know in a few weeks if U.S. earnings are indeed suffering from the trade spat. Even then, and if markets start to sell off, he says he’ll be ready to buy any dips provided two things remain in place.
“If the global economy hasn’t tipped over and money is still relatively free (lower interest rates), then we’ve got no reason to not be bullish,” he says.
Dow /zigman2/quotes/210598065/realtime DJIA -0.20% , S&P /zigman2/quotes/210599714/realtime SPX -0.30% and the Nasdaq /zigman2/quotes/210598365/realtime COMP -0.72% are up in what will be a shortened Wall Street session, with markets closed Thursday.
Gold is climbing, while oil is struggling, and the dollar /zigman2/quotes/210598269/delayed DXY +0.0048% is up slightly.