Weekly summary in a paragraph
The enthusiasm that characterised the previous week market rally was quickly suppressed by this week’s trading as US markets finished generally lower. The earnings beat by $WMT and the earnings miss by $TGT support the narrative of the consumer needing to reduce spend in these inflationary times. The European stock market continued its reversal and would actually now be outperforming the S&P500 was it not for the YTD Euro weakness.
Asset classes weekly performance
This week the Dow gained a meagre +0.1% (-7.68% YTD) while the S&P500 lost -0.5% (-16.8% YTD, we are 1x short), the Nasdaq did worse by falling -1.5% (-28.76% YTD, we have a 3x inverse position) and the Russell 2000 lost -1.7% (-17.94% YTD, we are 1x short). $Gold gave up -1.1% (-4.78% YTD) while silver finished -3.5% lower (-10.32% YTD). $Oil tanked -9.8% (+6.48% YTD). The 20-y recovered +1.1% this week (-32.3% YTD). The European stock market outperformed the US market indices and finished +0.8% higher (-16.59% YTD). The Euro lost -0.4% to the USD (-8.21% YTD).
If inflation imposes an immediate burden on the consumer, credit card debt is its long-term yoke. Credit card debt default rates have been increasing since Q2 2021 and while they are way below the highest levels seen in this bull market cycle, they are expected to go up. The next quarterly print is due next week. Most investors typically focus on the long side, even in bear markets, but sometimes investment opportunities are on the short side: credit card debt defaults may offer such an opportunity even if it means shorting stock market darlings like Visa, Mastercard and American Express.
Weekly Portfolio Update
We sold three positions: $KSS (+3.4%), $MP (+4.2%) and $GL (+13.47%). We increased cash and hedges, in other words our profit-taking did not go back into more investments, at least for now. Cash, precious metals and hedges now amount to 42% in our portfolio.
Top 5 Weekly Portfolio Performers
$GPS +11.32% (Consumer-Apparel/Shoes)
$WMT +5.37% (Consumer-Major Discount Chains)
$AJRD +4.36% (Aerospace)
$GL +3.66% (Insurance)
$SQQQ +3.29% (3x inverse the Nasdaq)
Portfolio Asset Allocation
– Long stock positions 58% (reduced)
– Hedges 10%, though equal to 15% considering leveraged ETFs (increased)
– Silver + Gold 4% (increased)
– Cash 28% (increased)
YTD Portfolio Performance
Our currency-adjusted YTD portfolio performance is -5.6% (excl. dividends) vs the European market loss of -8.4% (+2.8% European market beat) and the S&P500 loss of -16.8% (+3.0% US market beat).