Weekly summary in a paragraph
Third week of weakness for the US stock markets which finished markedly lower, partly fuelled by hotter than expected inflation data. The FOMC minutes did not provide any incremental news though there is still uncertainty about the size of the rate hike for the next meeting. While there are still notable companies reporting earnings next week, with this week most of S&P500 companies have archived Q4 2022 and analysts are looking to 2023 and especially 2024 forecasts. It is worth noting that earnings have shrunk year on year. The China reopening optimism seems to have cooled off somewhat. The European stock market was also weak, though it continues to outperform the US stock market since last October.
Asset classes weekly performance
This week the Dow finished -2.6% lower (-1.0% year to date) while the S&P500 decreased -2.9% (+3.4% year to date, we are 1 time short), the Nasdaq lost -3.9% (+8.9% year to date, we have a 3 times inverse position) and the Russell 2000 did slightly with a -2.7% depreciation (+7.3% year to date). Gold finished lower -1.33% (-2.4% year to date, we are long) while Silver tanked -5.3% (-14.5% year to date, we are long). Oil finished marginally higher +0.1% (-1.1% year to date). The 10-y US treasury yield was -0.15% lower (+4.1% year to date). The European stock market gave up -3.2% (+9.6% year to date). The Euro finished -1.28% lower against the US Dollar (-1.52% year to date).
Weekly pitch
“Don’t fight the Fed” is one of those evergreen expressions used by investors, especially those operating in the US stock market. In a nutshell, it means to align one’s investment strategies to the Fed policies in terms of interest rates, economic growth and price stability.
Interest rates are particularly important for the so-called “long duration” stocks, ie companies who are yet to return a profit and therefore borrow heavily to fund research or the assets they need to grow their business. Last year, interest rates skyrocketed and this adversely impacted tech stocks which is the main reason why the Nasdaq tanked and underperformed the Dow, which consists of value companies that are profitable now. While the answer to the question in this week’s newsletter title depends on the type of investor, today more than ever the old adage holds true.
We have beaten the market for the third week in row and are protected to the downside should there be more pain coming next week.
Weekly Portfolio Update
Here are this week’s movements: we took profits on NXPI (+4%), a bank ETF (+10%), a US Technology ETF (+10%) and Louis Vuitton (+12%); take profits were triggered on our Macy’s, Autonation, Intel and Tandem Diabetes Care short positions. We initiated new long positions on two European stocks. Cash, precious metals and hedges amount to 42% in our portfolio (increased compared to last week).
Top 5 Weekly Portfolio Performers
Proshares UltraPro Short Nasdaq ETF +9.64% (3 times inverse the Nasdaq)
Proshares UltraPro Short Russell 2000 ETF +8.99% (3 times inverse the Russell 2000)
Callum Petroleum +5.98% (Oil)
iPath Series B S&P500 VIX ETF +4.97% (Volatility ETF)
Proshares Short Nasdaq ETF +3.22% (1 time inverse the Nasdaq)
Portfolio Asset Allocation
US Long stock positions 47.5% (increased)
EU Long stock positions 9% (reduced)
Short stock position 1.5% (reduced)
Hedges 6.5% (reduced)
Silver & Gold 4.5% (increased)
Cash 31% (increased)
1-year Portfolio Performance
Our portfolio performance over the last year (12 months) is -3.8% (excl. dividends) vs the S&P500 loss of -7.4%, which corresponds to a +3.6% 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
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Invest responsibly!!!
Responsible Investor 