Hi YXI friends,

I hope everyone, their families, and friends are safe.

I would not recommend trading the “war” market. I prefer to wait and see how the market absorbs the knee-jerk reaction over the weekend before taking action. However, I understand the increased concerns about one’s portfolio during this period of great uncertainty.

What I have observed so far is that risk appetite has significantly diminished over the past week, even before the air strikes. This is visible through our macro surface, the HYG/IEF ratios, the re-bid for gold and silver, and the volatility in high-beta names.

However, liquidity has quietly improved, thanks to lower yields, a declining TGA, and an increase in the Fed’s balance sheet. IGV and Crypto have managed to defend their early February lows so far as well.

In this context, I would upgrade my risk warning to moderate from low. We have not yet seen concrete warnings of a cliff-drop crash, which deters me from getting too pessimistic.

We just need to keep watching the cross-asset currents closely every day to understand how the market thinks and operates during this time of uncertainty.

DISCLAIMER: This newsletter is intended for educational purposes only. Any information or analysis in this note does not constitute an offer to sell or a solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice, nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.

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