November 7th, 2022 | Does the recent election in Brazil offer an investment opportunity? | $EWZ $PBR $VALE $SQQQ $FCX $SLV $CPE $CBOE $SBSW $KO $AAPL $GOOG $META $MSFT $MP $NEM $CPE $ORSTED.CO

Weekly summary in a paragraph

A slew of positive economic data and a consistently hawkish Fed sent the US stock market lower this week. Despite indications that the next Fed’s interest rate hike may be contained to 0.5% after this week’s 0.75% increase, the jobs market is still too strong and inflation does not seem to slow down enough for the Fed to change its course such that the tightening monetary policy is limiting any upside potential at least in the short term.

On the other side of the pond, the European stock market staged the second week of gains.

Asset classes weekly performance

This week the Dow lost -1.4% (-11.9% YTD) while the S&P500 gave up -3.3% of gains (-20.9% YTD, we are 1x short), the Nasdaq tanked -5.6% (-33.9% YTD, we have a 3x inverse position) and the Russell 2000 lost -2.4% (-20.9% YTD, we are 1x short). $Gold gained +2.2% (-11.2% YTD) while silver skyrocketed +8.5% (-16.6% YTD). $Oil rose 4.9%. The 20-y recovered +5.7% this week (-35.3% YTD). The European stock market rose +1.3% (-28.3% YTD). The Euro finished flat against the USD (-13.3% YTD).

Weekly pitch

Following the marginal win of former president Lula, Brazil presents itself as more attractive economy to foreign investors. Additionally, rising oil prices are lifting the stock market since the Bovespa is heavily weighted on oil stocks such as $PBR which counts as 10% while the mining company $VALE reaches 15%. Former president Bolsonaro has not yet conceded though has signalled that he will collaborate in the transition. Brazil currently looks like an interesting investing opportunity unlike most of the emerging markets.

Weekly Portfolio Update

We initiated a position on the Brazilian stock market $EWZ which is already a profitable trade. We also went long on $USB, a regional US bank. We sold our positions on $PCTY and $FIS. Cash, precious metals and hedges were increased to 38% in our portfolio which beat the market by +2.2% this week.

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

$SQQQ +18.67% (3x inverse Nasdaq ETF)

$FCX +9.29% (Basic Materials-Metal Ores)

$SLV +8.57% (Silver ETF)

$EWZ +7.69% (Brazil Stock Market ETF)

$CPE +5.08% (Energy)

This is our asset allocation as things stand:

– Long stock positions 62% (increased)

– Hedges 9%, though equal to 14% considering leveraged ETFs (unchanged)

– Silver + Gold 3% (unchanged)

– Cash 26% (increased)

Our currency-adjusted YTD portfolio performance is -2.3% (excl. dividends) vs the European market loss of -15.0% (+12.7% market beat).

Invest responsibly!!!


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