If you are getting excited about 2023, read on | January 28th, 2023 Newsletter

Weekly summary in a paragraph

Another positive week for the stock markets around the world. In the US this was helped by positive data points in terms of Personal Consumption Expenditure (PCE), which came in at 0.1%, slowest rise since 2021; the US Q4 GDP increased at an annual rate of 2.9% in the fourth quarter of 2022, after increasing 3.2% in Q3. Bank of Canada is the first to pivot on the tightening policy: who will it be next? Notable Q4 earnings this week included Visa beating and guiding higher (we are long) and Intel which reported disastrous results (we are long two other semiconductors which a leading sector in the market). Looking at quarters and calendar years is arbitrary: if one focuses on the last three months, ie since the cycle lows, the European stock market has outperformed the US indices by 27% (currency adjusted): is your portfolio sufficiently exposed to the European market?

Asset classes weekly performance

This week the Dow finished +1.8% higher (+2.2% year to date) while the S&P500 did better with a 2.5% increase (+2.2% year to date, we are 1 time short), the Nasdaq gapped +4.3% higher (+10.0% year to date, we have a 3 times inverse position) and the Russell 2000 gained +2.4% (+7.2% year to date). Gold finished higher +0.4% (4.4% year to date, we are long) while silver was -2.1% weaker (-3.7% year to date, we are long). Oil was lower -3.4% (+1.0% year to date). The 10-y US treasury advanced +0.2% this week (+3.7% year to date). The European stock market gained +1.0% (+10.1% year to date). The Euro was only +0.1% higher against the US Dollar (1.5% year to date).

Weekly pitch

January is likely to finish with a positive print. But is this impressive rally a bull trap? As interest rates eased, long-duration stocks thrived in these first weeks of 2023 trading due to the P/E multiple expansion. In other words, borrowing money has become cheaper and with the E part of that ratio, ie the Earnings, being substantially unchanged, the P part, ie the Price, has gone up. There is a lot more uncertainty on the earnings side going forward: any sign of weakness in the Q4 earnings expected this week may trigger a sell-off, which is why prudent investors are better off not being fully invested and having cash and hedges in their portfolio (see our portfolio asset allocation below).

Weekly Portfolio Update

Here are this week’s movements: we took partial profits on Qualcomm (+11.53%); sell stops were triggered on our Shopify, Discovery Financial Services and Signet Jewelers short positions. Cash, precious metals and hedges amount to 39% in our portfolio (increased compared to last week).

Top 5 Weekly Portfolio Performers

Global X Lithium & Battery Tech ETF +8.93% (Lithium ETF)

Meta +8.88% (Social media/Tech)

Nucor +8.73% (Steel)

Qualcomm +8.54% (Semiconductors)

Old Republic International +8.48% (Finance/Specialty Insurance)

Portfolio Asset Allocation

Long stock positions 57% (unchanged)

Short stock position 4% (reduced)

Hedges 8% (unchanged)

Silver & Gold 4% (unchanged)

Cash 27% (increase)

Year to date Portfolio Performance

Our currency-adjusted year to date portfolio performance in Euro is +2.9% (excl. dividends) vs the European market gain of +10.1% and +4.4% in US Dollars vs the S&P500 gain of 2.2% (a +2.2% market beat).

…in case you missed it

Check out our first 2023 weekly newsletter to read the 5 things I got right in 2022…and the 5 I got wrong.

Podcasts

You can now listen to this newsletter on Apply Podcasts and Spotify.

Invest responsibly!!!

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