Oopsie Daisy! Equity Markets Stumbled In Early February
On the heels of historic 2017 complacency in broad equity averages, U.S. financial markets were jolted in the first week of February. The S&P 500 Index1 ended its record-setting streak of 404 trading days unblemished by a 5% correction with a startling two-week pullback measuring 10.16%. Like a Rorschach Inkblot, market observers have branded February’s dislocation to fit their fancy. The bullish précis suggests the short gamma of a tiny group of inverse-VIX ETFs mauled equity markets with bursts of compulsory selling, but these funds’ quick demise has freed equity averages to resume their upward slopes. Echoes of Chairman Bernanke’s March 2007 proclamation that subprime “seems contained” reverberate through recent FOMC characterizations of short-VIX equity declines as “small potatoes” with “virtually no consequence” (William C. Dudley, February 8, 2018), “the most predicted selloff of all times” (James Bullard, February 6, 2018), and ominously, “more volatility in markets can be a healthy thing” (Robert Kaplan, February 7, 2018). Figure 1: Seriously Delinquent Auto Loans (Blue) vs. Average Credit Card Interest Rate (Red),
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Trey Reik
Senior Portfolio Manager
Mr. Reik joined Sprott USA in March 2015 as lead portfolio manager of the Sprott Institutional Gold & Precious Metal Strategy. The Sprott Institutional strategy is composed of separately managed accounts and involves transparent investment in publicly-traded equities with no lock-up provisions of any kind. Sprott Institutional portfolios hold no illiquid or hard-to-value securities, no private placements and no derivatives or options of any sort. For the six years prior to joining Sprott, Mr. Reik served as Managing Member of Bristol Investment Partners LLC, a registered investment advisor managing separate accounts composed exclusively of gold equities. Mr. Reik served as Chief Investment Officer and Portfolio Manager to all Bristol customer accounts. From January 2006 through November 2008, Mr. Reik served as Strategist to Apogee Gold Fund, LLC and Apogee International Gold Fund, Ltd. Before joining Apogee, Mr. Reik was Founder and Portfolio Manager of Clapboard Hill Partners, L.P., a long/short equity partnership focused primarily on precious metal equities and financials. Clapboard Hill Partners launched during February of 2002 and merged into Apogee Gold Fund during the first quarter of 2006. Mr. Reik served as Senior Managing Director of Carret Securities, LLC (2000-2006) and held investment positions at Prudential Securities (1996-2000), Smith Barney, Inc. (1993-1996), William D. Witter, Inc. (1991-1993), Mitchell Hutchins Asset Management, Inc. (1984-1991), and Security Pacific National Bank (1982-1984). Mr. Reik has 34 years of investment experience. Mr. Reik graduated from Pomona College in 1982 with a B.A. in Economics.
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