Stocks fell last week as a result of a hawkish Federal Reserve meeting.
The chairman of the Fed, Jerome Powell, said interest rates would continue to go up, and it would be better to do more rather than less.
Markets fell following the hawkish comments, but managed to recover some of their losses on Friday.
Thus, while economic fundamentals suggest stocks should fall more, price action indicates we may still get a year-end rally.
At the moment, we do not have a strong view on whether such a rally will occur, so decided to dial risk exposure back down on Thursday and Friday. If the markets continue to rally, we might increase risk exposure, though the general approach remains to take less risk than usual. The goal will be to keep losses small, rather than go for the maximum gains, until the economy bottoms around Q3 2023.
Most positions in the Financials and Energy sectors were closed. The portfolio is now 75% in cash.