Hedge Fund Telemetry founder Tom Thornton joined me yesterday on Talking Markets, and was as generous as ever with his take on markets right now, how he’s positioning, and beat-up stuff he’s buying.
Thank you , , , and many others for tuning in live on Substack…!
The Big Picture
Stocks dropped yesterday on weak GDP news, before rallying all the way back towards the end of the day. “That end of day spike is typical of end of quarter,” Tom said, adding that there was a particularly large end-of-month rebalance for equities.
Also yesterday, Meta and Microsoft reported earnings, with both exceeding Wall Street expectations, and Microsoft reporting its best ever quarterly revenue profit totals.
🪢Side note: Tom flagged Microsoft and Meta as potential buys with us at the start of March, which was a pretty great trade between then and now. Now however, Tom has just put on a small short position on Microsoft.
“It’s been a pretty eventful month, and it’s been a pretty eventful year so far,” he said. “And I think it’s going to continue to be volatile,” driven by stuff like a social post-heavy administration, and tariffs. “Everyone is uncertain,” Tom said. “Corporate managers are sitting on their hands, the major funds have really not increased their exposure.”
Back in December, Tom said this on Talking Markets:
“I do anticipate seeing the S&P under 5,000 at some point in the year, and maybe 4,500. I also wouldn’t rule out the potential for something more dramatic in the sense of some sort of crash. And I don't say that lightly and I'm not predicting it tomorrow, but I think as we've just gone straight up and we haven't had any meaningful correction, and people are so positioned on one side, it could be something dramatic.”
Well, that’s already happened and we’re only in Q2. As a result, Tom is trying to “lighten up into strength.” He is still net long the market overall, but has started trimming some longs and adding some shorts, “and I think that’s going to be the play all year,” he said.
Coming Up Next
“If you didn’t have the political backdrop that is driving the ups and downs of the market, then I would say you could be more bearish,” Tom said. There’s a lot to dislike:
“It looks like we’re going to go into a recession”
“The big risk is that unemployment is going to start to rise,” and when that happens, “it tends to last for quarters, not days”
The GDP numbers yesterday were “pretty much stagflationary”
Even if the Fed starts cutting rates, “they have to cut many times before there’s really any change that happens”
“We need to see results more than talk” with regard to tariffs, “and I don’t think there’s anything productive happening right now”
We would “need to see rates below 3.5% to start to unfreeze the housing markets and help the treasury refunding, and if we get to that level, there’s probably going to be a bigger problem happening in the market or the world, so be careful what you wish for”
Gold and the Dollar
Tom is neither a bull nor a bear when it comes to gold, but he has shorted it recently. “It became such a safe haven, and everybody talked about it being such a safe haven, and everybody was buying gold,” he said. “If [stuff like] tech or indices are starting to work, then people are going to come out of gold. So I think there’s a positioning problem right now where people might be too much in gold.”
💡“I think 10% lower from here might be a good opportunity to buy.”
As for Bitcoin, well:
On to USD: “The dollar has a DeMark buy signal [as of] yesterday, and I see the dollar starting to lift here,” he said. “I think it’s over-sold, and if the dollar starts to lift, I think it could move DXY to 105, maybe a little more. I like the dollar here.”
What Tom Likes Right Now
Tom is “trying to buy market leaders,” he said. “When markets go down, you need to upgrade the quality of things.” Overall, he has lowered his exposure from around 50 stocks to 31. He:
Is still long AliBaba
Likes Alcoa
Likes uranium
Is “buying some real beat-up energy names - Apache, Halliburton… I like Occidental down here.”
Is still long Golar and is up around 40% on that
And Finally… Use a Shotgun, Not a Sniper Rifle
“Size your positions appropriately,” Tom said. “By that, I mean you can still make money if you have a 2% weighting in a position, and you won’t get killed if you’re wrong. I go up to 5% max and it gives me the ability to have a lot of different things [on]. I try to keep 20% max in any particular sector.”
The other thing, Tom said, is, “don’t beat yourself up if you’re wrong. You don’t need to catch the exact low or exact high. You can be a little early taking profits, you can leg your way into positions. Use a shotgun, not a sniper rifle. You’ll be much better off.”
Now we have to make “Shotgun Tom” a thing.
Enjoy,
Maggie
💡If you’re interested in a trial of Hedge Fund Telemetry, just email Tom at info@hedgefundtelemetry.com.
Important Disclaimer: It is crucial to remember that this article is for informational purposes only and should not be considered investment advice. Consult with a qualified financial advisor to assess your risk tolerance, investment goals, and overall financial plan.
