October 22nd, 2022 | What do declining 2023 and 2024 earnings estimates mean for your portfolio? | $FCX $FTNT $SAND.ST $TGT $JPM

Weekly summary in a paragraph

The stock market staged a significant rally this week with most indices finishing 3% or more higher, in part fuelled by a rumour that the Fed is going to become less hawkish in December. Is it yet another bear rally? Only time will tell, though something seems to have changed now that the fed funds futures are reaching 5%. Earnings season is now in full swing and 165 S&P500 companies will report next week.

Asset classes weekly performance

This week the Dow gained +4.8% (-16.5% YTD) while the S&P500 did slightly worse +4.7% (-21.3% YTD, we are 1x short) and the Nasdaq outperformed both +5.2% (-32.2% YTD, we have a 3x inverse position). The Russell 2000 recovered +3.5% (-24.1% YTD, we are 1x short). $Gold gained 0.8% (-8.4% YTD) while silver skyrocketed +5.5% (-14.5% YTD). $Oil inched 0.5% higher. The 20-y fell by -5.5% this week (-34.7% YTD). The European stock market staged a +6.0% comeback (-30.3% YTD). The Euro recovered 1.4% against the USD (-13.8% YTD).

Weekly pitch

Stocks follow earnings and earnings expectations. Declining earnings put pressure on stock prices and so do higher interest rates. So far, the ongoing bear market has mainly been caused by higher interest rates but if earnings start rolling over, the downward slope may steepen. For 2024, analysts now expect 250$ in earnings for the S&P500 which corresponds to a 9.9% appreciation relative to the current price assuming a 16.5 multiple. Earnings estimates continue to decline as time goes by, though, which reduces opportunities for appealing returns.

Weekly Portfolio Update

We covered 1/3 of our short position in IWM with a 22% gain, thereby reducing the overall weight of hedges in our portfolio. We also initiated a trade on TLT as there is a potential short-term shift in sentiment. Cash, precious metals and hedges now amount to 40% in our portfolio which finished flat this week while the market fell.

Here are the top 5 performers of our portfolio this week:

$FCX +15.88% (Basic Materials-Metal Ores)

$FTNT +11.68% (Technology-Software-Security)

$JPM +9.93% (Banks-Money Center)

$TGT +9.27% (Consumer-Major Disc. Chains)

$SAND.ST +8.61% (Specialty Industrial Machinery)

This is our asset allocation as things stand:

– Long stock positions 60% (increased)

– Hedges 9%, though equal to 15% considering leveraged ETFs (decreased)

– Silver + Gold 3% (unchanged)

– Cash 28% (decreased)

Our currency-adjusted YTD portfolio performance is -2.3% (excl. dividends) vs the European market loss of -16.5% (+14.2% market beat).

Invest responsibly!!!


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s