Weekly summary in a paragraph
Sure, everyone is expecting a slowdown in the rates hike next week, but the November headline and core PPI both hotter than expected may indicate that the Fed is not going to pivot any time soon. It was a horrible week on the global stock markets which finished markedly lower with the US indices declining for the first time after 3 weeks.
China was the exception as the reopening narrative gains strength and property support optimism sent Chinese stocks higher. The European stock market did a U-turn and contracted this week as cold weather exerts pressure on its frail energy sector.
Asset classes weekly performance
This week the Dow lost -2.8% (-7.04% YTD) while the S&P500 fell -3.4% (-17.45% YTD, we are 1x short), the Nasdaq retraced -4.0% (-29.17% YTD, we have a 3x inverse position) and the Russell 2000 tanked -5.0%% (-18.715% YTD, we are 1x short). $Gold finished marginally lower -0.1% (-2.63% YTD) and has been overtaken by silver which is the clear winner with its +1.2% gain (-1.39% YTD). $Oil tanked -10.9% and is now in negative territory for the first time this year (-4.99% YTD). The 20-y fell -0.7% this week (-26.33% YTD). The European stock finished -1.5% lower (-14.62% YTD). The Euro finished flat on the USD (-7.17% YTD).
While 2022 has clearly seen a bear market, from time to time the battle between the bulls and the bears does not have a clear winner. The bearish narrative is based on sticky inflation, uncertainty in terms of terminal rate, recession risk and the revision of earnings forecasts to the downside. Conversely, the bullish narrative centres around the Fed pivoting on interest rates, disinflation, sustained strength in the labour market and positivity around China’s potential reopening. One may consider not taking sides and using hedges + cash to reduce their exposure to the downside as we are doing in our portfolio.
Weekly Portfolio Update
Here are this week’s movements: we took partial profits on $WMT (+5.1%) and sold our short position on $ISF.L (-9.9%). We initiated short positions on $TSM and $SIG. Cash, precious metals, hedges and short stock positions amount to 43% in our portfolio (unchanged compared to last week).
Top 5 Weekly Portfolio Performers
$SQQQ +11.25% (3x inverse Nasdaq)
$VXX +6.40% (Volatility ETF)
$IWM +5.01% (short position on Russell 2000)
$SH +3.57% (1x inverse S&P500)
$SLV +1.27% (Silver ETF)
Portfolio Asset Allocation
– Long stock positions 57% (unchanged)
– Short stock position 2% (increased)
– Hedges 7%, though equal to 10% considering leveraged ETFs (reduced)
– Silver & Gold 4% (unchanged)
– Cash 30% (reduced)
YTD Portfolio Performance
Our currency-adjusted YTD portfolio performance is -6.6% (excl. dividends) vs the European market loss of -7.5% (+0.9% European market beat, expressed in €) and the S&P500 loss of -17.5% (+3.7% US market beat, expressed in $).