active money managers have just reached a 99% exposure rate to the US Stock Market this is a level of exposure that we've only witnessed four times before over the course of the last 2 years and this new data point has just made us shift our portfolio allocation at braavos research.com so this is a short quick update that we're doing for you guys on YouTube to make sure that you guys are also able to weigh in this risk correctly this is an index called the Naim exposure index and it gives a measure of how exposed active
money managers on Wall Street are to the US Stock Market now most of the time this is not something that we pay a lot of attention to but we do pay a lot of attention to it when it starts to get into some extreme zones like it is today now if we add the US Stock Market the S&P 500 Index on top of this chart and we zoom out a little bit we can see that a lot of the similar spikes in this exposure index have coincided with some local peaks in the stock market now
all of these readings that you see here are where the index reached 100 now a reading of 100 on this exposure index suggests that on average active money managers which are institutional investors are 100% exposed to the stock market now that can be dangerous for short-term market performance because if some of these active money managers decide to rebalance their portfolios they'll be selling some of their exposure to the stock market and that can create some Market volatility it can create a temporary decline in the stock market and that's what happened in all of these instances
and by the way the very opposite is true when these active money managers have very little exposure to the stock market that can often coincide with local Bottoms in stocks because as these money managers buy back into the stock market it can create an upwards driving force for US stocks in general so with the recent 99% exposure reading on this index we've gotten a little bit more defensive on our stock market exposure and by the way this is a strategy that we've communicated to our clients a few times over the last couple of years and
that has been very powerful by the way we are extending the discount campaign and doing Cyber Monday so if you missed our Black Friday offer make sure to take advantage of this one you'll have access to all of our trades buy and sell alerts in our entire portfolio strategy now to be clear we're not making a high conviction bet on the fact that the market is going to correct right now as we've mentioned in pretty much all of our recent videos the price structure of the S&P 500 is undoubtedly bullish today and the same forces
that have been driving the stock market higher since October of 2022 are very much still intact today one of the major driving factors is this line right here which is simply long-term us interest rates Rising interest rates in 2022 were a huge drag for the US Stock Market when they began to stabilize in October of 2022 that's when the stock market Bull Run began and as you can see recently we've seen interest rates come back down again which is quite a good thing for the stock market you can see all of the times where interest
rates have stabilized like they are today we've seen the stock market make a nice move up so what we've communicated to our clients is that we're simply rebalancing our portfolio of active trades a little bit because when other active managers are Overexposed to the stock market it's only a question of time for when they will be rebalancing their portfolios so it really becomes a game of musical chairs and you don't want to be the last one standing you don't want to be the last one rebalancing his portfolio so we closed a couple of the more
risky bets that we had going long on the market and replaced them with other opportunities that we've been waiting to enter one of them being a long trade on natural gas that seems to be breaking out above a basing pattern right now and one of them being a short bet meaning betting against a specific Health Care stock because we happen to think that the health care sector is very vulnerable to declining today this is what the earnings so the profits of the healthcare sector looks like going back to the 1990s throughout the last 30 years
we've generally seen their profits go up right up until the last couple of years where overall the healthcare sector has seen a decline in its earnings this is one of the only S&P 500 sectors where that's been the case and at the same time when we look at the valuations of the healthcare sector today it recently reached some of the highest levels since the dot bubble so this is a very weak sector that's not seeing a lot of growth and that is quite expensive additionally we have Robert Kennedy Jr that's likely going to be making
some changes in the healthcare industry which could further hurt the sector we think it's entirely possible that the four PE ratio of the healthcare sector which is the valuation of the healthcare sector comes back down to the bottom of the range from 2015 to 2020 that could take the valuation of the healthcare sector down to 14 which would be another 20 to 30% decline from current levels so this is one of the ways that we're rebalancing our portfolio a little bit but to be clear we still very much have a net long exposure to the
stock market we have a bunch of exposure to different US stocks and we have long positions on crypto currencies that have tons of momentum today again if you want to follow our portfolio and trading strategies step by step go to our website take advantage of the discount today you won't regret it
