Braavos Research: Portfolio Shift and Market Outlook
Braavos Research (braavosresearch.com) has announced the complete sale of its US stock market exposure. This decision comes as the S&P 500 index reaches a new all-time high, experiencing a significant "meltup." The firm believes a substantial opportunity will arise in the coming month and is repositioning itself to capitalize on it.
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Limited-Time Offer: There is a limited-time Fourth of July discount available for those interested in accessing Braavos Research's trading strategy and alerts.
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Trade Transparency: All trades made since 2025 are visible on their homepage.
Reasons for the Portfolio Shift
This marks the most significant portfolio adjustment since March, when Braavos Research reduced its US stock market exposure due to escalating trade war risks. However, the current situation presents a different set of circumstances.
Contrasting Today's Market with March
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Trade War Tensions: Unlike March, when trade tensions were rising, they are currently cooling down.
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Market Momentum: In March, the S&P 500 fell below key moving averages, indicating a potential end to the prior year's uptrend. Today, the opposite is true.
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Golden Cross: The S&P 500 recently surpassed these same moving averages, which are now trending upwards and have formed a "golden cross" (50-day moving average crossing above the 200-day moving average). This technical signal typically suggests renewed market momentum and potential for further price increases.
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Historical Significance: Golden crosses have historically been reliable indicators of market rallies. Since the 1950s, 30 out of 37 golden crosses on the S&P 500 have preceded market gains in the following 6 to 12 months.
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Economic Resilience: The US economy remains resilient, with real GDP growth between 2% and 3%, considered a healthy range for sustained bull markets.
Justification for Selling Despite Positive Indicators
Despite the seemingly positive outlook, Braavos Research has chosen to exit its long positions due to concerns about the speed of the recent market gains.
Overextended Market
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Rapid Gains: The S&P 500 has achieved a 25% return within the last 60 trading sessions. Historically, such rapid gains have often been followed by pullbacks.
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Historical Precedent: Analyzing past instances of similar gains reveals that in 100% of cases, a pullback of some kind occurred in the subsequent one to two months.
Presidential Election Cycle Seasonality
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Market Seasonality: The S&P 500 has closely mirrored the historical four-year presidential election stock market seasonality pattern.
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Anticipated Pullback: According to this pattern, the third quarter of a presidential election year typically sees a local peak followed by a pullback. This aligns with Braavos Research's view that the market is currently overextended.
Important Note: Braavos Research emphasizes that this is a short-term trading strategy and not a recommendation for long-term investors to time the market. They advocate separating trading from investing.
Strategy for Taking Advantage of Potential Pullback
Braavos Research is adjusting its portfolio to prepare for a potential market pullback.
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Reduced US Stock Exposure: They have significantly reduced their exposure to US stocks.
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Uncorrelated Assets: The portfolio now consists primarily of assets uncorrelated to the US stock market, such as Bitcoin, which they believe could hold up well or even increase in value during a downturn.
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Watch List: They have identified a watch list of stocks, primarily in the semiconductor, industrial, and financial sectors, that they intend to buy when the market corrects.
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Cash Reserves: The firm is raising cash to have "dry powder" available to capitalize on these opportunities.
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