Lessons learnt from beating the stock market | December 31st, 2022 Newsletter

Weekly summary in a paragraph

The last trading week of 2022 in the US stock disappointed: despite a strong leg up in the Thursday session, the Santa rally did not materialise and all the major US market indices were mildly lower. Some late earnings report dominated the news in a week characterised by low volume due to the holiday season: $NKE surprised while $MU disappointed.

The Bank of Japan made another unexpected move by launching ‘emergency buys’ of 2 and 5-year bonds. Mild weather in Europe have helped ease the pain of a still unresolved energy infrastructure and base load crisis.

Meanwhile in China a total U-turn on Covid restrictions is allegedly causing millions of deaths with consequences on policies all over the world. Investors need to watch this development as it may impact earnings as well as commodity prices.

Asset classes weekly performance

This week the Dow lost -0.1% (-8.58% YTD) just like the S&P500 (-19.44% YTD, we are 1x short), the Nasdaq retraced -0.3% (-33.03% YTD, we have a 3x inverse position) and the Russell 2000 finished flat (-21.40% YTD, we are 1x short). $Gold finished higher +1.4% (-1.23% YTD) and silver gained +0.8% (+2.14% YTD). $Oil continued its climb with a +0.9% gain (4.24% YTD). The 20-y lost -2.6% this week (-30.04% YTD). The European stock finished -0.3% lower (-15.86% YTD). The Euro gave up -0.8% against the USD (-6.14% YTD).

Weekly pitch

The year that just ended was one the of the worst for investors long stocks and bonds – here are a few lessons learnt along the way: 1) a rising interest rate environment hurts intangible, long-duration stocks much more than companies operating in the so-called real economy; 2) dollar strength negatively impacts on precious metals and emerging markets; 3) the war economy accelerates de-globalisation and is one of the contributors to sustained high inflation; 4) hedging is a critical tool available to investors that allows them to follow a risk-based approach. Many of these themes will continue to dominate in the new year, or at least for part of it, so if investors want to beat the market in 2023 (just like we did in 2022), they need to adopt an active (as opposed to a passive, ‘buy-and-hold’) approach to investing and hedge.

Weekly Portfolio Update

Here are this week’s few movements: we initiated a long position in $CALM, took profits on our $NVDA short position (+9.5% gain) and a stop loss was triggered on $PLUG. Cash, precious metals, hedges and short stock positions amount to 44% in our portfolio (unchanged compared to last week).

Top 5 Weekly Portfolio Performers

$CPE +2.92% (Oil)

$JPM +2.15% (Banking)

$META +1.95% (Social Media)

$LEA +1.72% (Auto Parts)

$CHTR +1.55% (Communications)

Portfolio Asset Allocation

Long stock positions 56% (unchanged)

Short stock position 3% (unchanged)

Hedges 9% (unchanged)

Silver & Gold 4% (unchanged)

Cash 28% (unchanged)

YTD Portfolio Performance

Our currency-adjusted YTD portfolio performance is -9.47% (excl. dividends) vs the European market loss of -10.43% (+0.3% European market beat, expressed in €) and the S&P500 loss of -19.33% (+3.8% US market beat, expressed in $).

Invest responsibly!!!

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