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FXTM: stocks recover quickly but consider 'portfolio insurance' such as gold

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(Kitco News) - The stock market has staged the fastest turnaround in history since a pandemic-induced collapse, but investors still might want to consider some type of “portfolio insurance” such gold or put options, said Hussein Sayed, chief market strategist at FXTM. U.S. stock-index futures are continuing their strong recovery on Monday, with the market buoyed by a further reopening of economies and Friday’s strong employment report for May. “The S&P 500 has almost completed a round trip trip for the year with the index only 1% lower from where it started 2020,” Sayed said. “However, this time it is not only being led by big tech and biotech firms, but also the most beaten-up sectors such as airlines and leisure are surging. That is what you’d like to see as a signal of a broader economic recovery, but the big question remains – are we truly witnessing a broader economic recovery or is it a false signal from equity markets?” He commented that when looking at fundamentals, “there has never been such a disconnect between stock-price levels and projected earnings.” Sayed also pointed out that U.S. commercial Chapter 11 bankruptcy filings in May jumped by 48% from a year earlier. “In the current environment, it does not seem to matter anymore if fundamentals match up with equity prices. Fear of missing out and simple greed may continue to push risk assets higher, and many of those who have remained on the sidelines will still want to participate,” Sayed commented. “As I have mentioned previously, it would be wise to consider buying portfolio insurance whether it’s in the form of gold, put options or another form of hedge, until it’s clear that the economy is truly recovering at the pace suggested by risk asset classes.”

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