March 23, 2022
Vacuum: Notwithstanding unscheduled Russia/Ukraine developments, the calendar looks fairly quiet until CQ1 earnings season kicks off on 4/13. A lack of meaningful catalysts generally leads to trend continuation. The trend was higher coming into the expected vacuum, which should keep near-term risks skewed to the upside. The forced selling, de-risking and capitulation at retest lows satisfied our preconditions for a reversal. Last week’s rally was primarily driven by short covering and a lack of incremental long-only supply, but investors are still mispositioned and sellers have already sold. Demand may be cautious, but still likely to overpower suppressed supply.
Sectors: Our preference is still to add exposure in value sectors in the near-term, but the rerating in Tech multiples seems mostly complete. SaaS multiples have compressed slightly below pre-pandemic levels and 10-year bond yields face technical resistance in the 2.35%-2.60% range. There’s now an opportunity to add incremental exposure in Tech.