Was this week’s rally justified? | Responsible Investor Weekly Newsletter, November 11th, 2023

Responsible Investor is a weekly newsletter and an Apple/Spotify podcast for those who are interested in investing responsibly. Go to responsibleinvestor.dk for more information and to read our disclaimer. This week’s newsletter is titled “Was this week’s rally justified?”, and was written on November 11th, 2023.

Weekly summary in a paragraph

The US stock market indices were mostly higher this week, despite somewhat hawkish commentary from chair Powell and a weak US bond auction. Small caps lagged and which finished significantly lower. The European stock market managed to stay afloat despite more companies missing earnings estimates and warning about lower full-year profits. The 2-10y spread continues to widen this week after the trend reversal experienced in late October and is still inverted at -41 basis points. There was nothing incremental in terms economic data. In corporate news, Disney and Gilead Sciences published strong earnings reports while The Trade Desk disappointed. Next week more Q3 earnings will come in, as companies such as Home Depot, Target, Palo Alto Networks, Applied Materials and The Gap report.

Asset classes weekly performance

This week the Dow finished +0.7% higher (+3.4% year to date) while the S&P500 gained +1.3% (+15.0% year to date), the Nasdaq rose +2.4% (+31.8% year to date) and the Russell 2000 gave up -3.2% (-3.2% year to date). Gold slid -2.2% (+0.9% year to date) while Silver tanked -4.0% (-11.2% year to date). Crude Oil dropped -4.3% (+3.2% year to date). The 10-y US treasury yield lost -0.7% (+22.0% year to date). The European stock market gained +0.9% (+11.6% year to date). The Euro lost -0.43% against the US Dollar (-0.22% year to date).

Weekly pitch

It was not a very convincing week as the markets rallied with no significant news to justify the move. In fact, hawkish statements by Powell and a poor auction would have suggested a drop from last week’s levels. From a technical perspective, the Dow is very close to a death cross and if the S&P500 and the Nasdaq are not able to keep up the recent momentum, they too will be in a similar position. Next week the all-important CPI and PPI reports will be published: these have the potential to be market movers and are closely watched by the Fed who, together with labour market report, use this data to define their monetary policy. Responsible Investors should exercise caution and maintain a healthy proportion of their portfolio in cash and hedges as well as a diversified portfolio with some exposure to the European stock market and to emerging markets.

Weekly Portfolio Update

Here are this week’s movements: stop losses were triggered on our Denbury Resources long position and on our XPO Logistics short position. Cash, US treasury bills, precious metals and hedges amount to 37% in our portfolio (increased compared to last week).

Top 5 Weekly Portfolio Performers

ProShares UltraPro Short Russell 2000 +9.6% (3 times inverse the Russell 2000 ETF)

ACI Worldwide +8.3% (Tech)

VanEck Vectors Semiconductor ETF+5.2% (Semiconductors ETF)

Meta +4.5% (Tech)

Rational AG +4.5% (Industrial Machinery)

Portfolio Asset Allocation

US stocks long positions 49.5% (reduced)

EU stocks long positions 8.5% (unchanged)

Emerging markets long positions 5.0% (unchanged)

US stocks short positions 0% (reduced)

Hedges 7.5% (unchanged)

Silver & Gold 2.5% (unchanged)

US Treasury bills 2% (unchanged)

Cash 25.0% (increased)

1-year Portfolio Performance

Our portfolio performance over the last 12 months is +4.5% (excl. dividends) vs the S&P500 gain of +11.6%.

Invest responsibly!!!

What caused the big rally on Friday? | Responsible Investor Weekly Newsletter, October 7th, 2023

Responsible Investor is a weekly newsletter and an Apple/Spotify podcast for those who are interested in investing responsibly. Go to responsibleinvestor.dk for more information and to read our disclaimer. This week’s newsletter is titled “What caused the big rally on Friday?”, and was written on October 7th, 2023.

Weekly summary in a paragraph

The US stock market indices were mixed this week, as US treasury yields kept rising while the recently strong oil prices fell substantially. The European stock market managed to stay afloat and was helped by the first signs of dollar weakening in weeks. The 2-10y spread tightened significantly this week and is still inverted at -30 basis points. In economic data, there were strong job reports on Tuesday and Friday as well as ISM non-manufacturing data almost in line. In corporate news, McCormick and Levi’s published disappointing earnings reports while Constellation Brands beat expectations. Next week the first significant batch of Q3 earnings will come in, as large US banks such as JP Morgan, Wells Fargo and Citi report.

Asset classes weekly performance

This week the Dow finished -0.3% lower (+0.8% year to date) while the S&P500 gained +0.5% (+12.2% year to date), the Nasdaq rose +1.6% (+28.3% year to date) and the Russell 2000 gave up -2.2% (-0.9% year to date). Gold finished -1.0% lower (flat year to date) while Silver lost -3.0% (-10.4% year to date). Crude Oil tanked -6.8% (+9.8% year to date). The 10-y US treasury yield rose +2.2% (+26.1% year to date). The European stock market was barely higher at +0.1% (+8.7% year to date). The Euro gained +0.26% against the US Dollar (-1.10% year to date).

Weekly pitch

It was a fairly negative week on the stock market as several positive jobs report came in better than expected leaving investors little chances to hope for a shift in monetary policy. Oversold conditions worsened at the start of the week and the S&P500 approached its 200-day moving average. And yet, despite the very strong report on Friday, the US markets staged a significant rally probably due to the average hourly earnings coming in cooler than expected. Investors can be unreasonably selective in terms of which data to base their decisions on. In the medium term, however, yields and inflation data are likely to affect where the markets go from here. In the long term, earnings and earnings expectations drive stocks. Responsible Investors should exercise caution and maintain a healthy proportion of their portfolio in cash and hedges as well as a diversified portfolio with some exposure to the European stock market and to emerging markets.

Weekly Portfolio Update

Here are this week’s movements: we have taken partial profits on our Halliburton long position (+30.4%). We have accumulated on our Boeing, Newmont Mining, Brazil ETF and silver ETF long position. Sell stops were triggered on our Desktop Metal long position. Cash, US treasury bills, precious metals and hedges amount to 37% in our portfolio (decreased compared to last week).

Top 5 Weekly Portfolio Performers

Foot Locker +14.1% (Apparel)

ProShares UltraPro Short Russell 2000 +6.6% (3x inverse the Russell 2000)

Google +5.2% (Tech)

Meta Platforms +5.1% (Tech)

Walt Disney +2.3% (Entertainment)

Portfolio Asset Allocation

US stocks long positions 49% (unchanged)

EU stocks long positions 8.5% (unchanged)

Emerging markets long positions 5.0% (increased)

US stocks short positions 0.5% (reduced)

Hedges 7.5% (unchanged)

Silver & Gold 2.5% (increased)

US Treasury bills 2% (unchanged)

Cash 25.0% (decreased)

1-year Portfolio Performance

Our portfolio performance over the last 12 months is +9.2% (excl. dividends) vs the S&P500 gain of +15.1%.

Invest responsibly!!!

Will oversold conditions help the stock market? | Responsible Investor Weekly Newsletter, September 30th, 2023

Responsible Investor is a weekly newsletter and an Apple/Spotify podcast for those who are interested in investing responsibly. Go to responsibleinvestor.dk for more information and to read our disclaimer. This week’s newsletter is titled “Will oversold conditions help the stock market?”, and was written on September 30th, 2023.

Weekly summary in a paragraph

The US stock market indices were mixed this week, as US treasury yields rose and portfolio managers increased spending as part of the end of quarter ‘window dressing’. The European stock market fell for the second week in a row despite better thank expected inflation data in the Eurozone. The 2-10y spread tightened significantly this week and is still inverted at -44 basis points. A strong jobs report and cooler than expected PCE data were this week’s highlights in terms of US economic data. In corporate news, Micron and Accenture guided lower while Nike jumped on strong guidance. Despite the vast majority of the S&P500 companies having now reported Q2 earnings, there are still notable ones due to be published next week such as McCormick, Tilray, Constellation Brands and Levi’s.

Asset classes weekly performance

This week the Dow finished -1.3% lower (+1.1% year to date) while the S&P500 lost -0.7% (+11.7% year to date), the Nasdaq rose +0.1% (+26.3% year to date) and the Russell 2000 gained +0.5% (+1.4% year to date). Gold finished -3.7% lower (-3.2% year to date) while Silver tanked -4.3% (-10.9% year to date). Crude Oil gained +1.2% (+20.4% year to date). The 10-y US treasury yield rose +0.7% (+20.6% year to date). The European stock market gave up -1.3% (+8.6% year to date). The Euro lost -0.68% against the US Dollar (-1.26% year to date).

Weekly pitch

Technical analysis can help assess the market direction from time to time. With the market currently in oversold conditions, there is a fair chance of a bounce. This week’s performance was masked by end of quarter movements. New money pours in at the beginning of the month which might sustain the stock market at the beginning of next week. In the medium term, however, yields are likely to affect where the markets go from here. In the long term, earnings and earnings expectations drive stocks. Responsible Investors should exercise caution and maintain a healthy proportion of their portfolio in cash and hedges as well as a diversified portfolio with some exposure to the European stock market and to emerging markets.

Weekly Portfolio Update

Here are this week’s movements: we have taken full profits on our Ross Stores short position (+8.5%). We have initiated a long position on Boeing and a consumer staples ETF, and accumulated on our Newmont Mining long position. Cash, US treasury bills, precious metals and hedges amount to 38% in our portfolio (decreased compared to last week).

Top 5 Weekly Portfolio Performers

The Gap +6.9% (Apparel)

Callon Petroleum +5.5% (Oil)

ProShares UltraPro Short Dow 30 +4.4% (3x inverse the Dow)

Denbury Resources +2.2% (Oil)

Hilton Worldwide Holdings +1.8% (Hotels & Leisure)

Portfolio Asset Allocation

US stocks long positions 49% (increased)

EU stocks long positions 8.5% (unchanged)

Emerging markets long positions 4.5% (unchanged)

US stocks short positions 0.5% (reduced)

Hedges 7.5% (unchanged)

Silver & Gold 2% (unchanged)

US Treasury bills 2% (unchanged)

Cash 26.5% (decreased)

1-year Portfolio Performance

Our portfolio performance over the last 12 months is +12.6% (excl. dividends) vs the S&P500 gain of +17.8%.

Invest responsibly!!!

What does a rising 10-year yield mean for the stock market? | Responsible Investor Weekly Newsletter, September 23rd, 2023

Responsible Investor is a weekly newsletter and an Apple/Spotify podcast for those who are interested in investing responsibly. Go to responsibleinvestor.dk for more information and to read our disclaimer. This week’s newsletter is titled “What does a rising 10-year yield mean for the stock market?”, and was written on September 23rd, 2023.

Weekly summary in a paragraph

The US stock market indices finished markedly lower this week, as the Fed decided to pause interest rate hikes at its September FOMC meeting and the ‘dot plot’ alluded to a ‘higher-for longer’ monetary policy. The European stock market returned to losses on news of economic slowdown within the region and particularly in France. The 2-10y spread tightened slightly this week and is still inverted at -66 basis points. It was a slow news week in terms of economic data. In corporate news, both Stitch Fix and Fedex rose on a Q2 earnings beat while Kb Home slumped. Despite the vast majority of the S&P500 companies having now reported Q2 earnings, there are still notable ones due to be published next week such as Nike, Carnival, Micron and Costco. Accenture will report its Q3 earnings, also.

Asset classes weekly performance

This week the Dow finished -1.9% lower (+2.5% year to date) while the S&P500 lost -2.9% (+12.5% year to date), the Nasdaq gave up -3.6% (+26.2% year to date) and the Russell 2000 fell -3.8% (+0.9% year to date). Gold finished -0.4% lower (+1.0% year to date) while Silver gained +1.4% (-5.2% year to date). Crude Oil lost -0.3% (+19.8% year to date). The 10-y US treasury yield jumped +2.8% (+17.0% year to date). The European stock market gave up -2.5% (+10.0% year to date). The Euro lost -0.19% against the US Dollar (-0.58% year to date).

Weekly pitch

The risk-off experienced this week was driven by the sell-off in US bonds, particularly in the 10-year which reached the 4.5% yield mark. This is particularly negative for long duration stocks as their price to earnings ratio is harmed by rising yields. Long duration stocks include tech stocks as well as speculative stocks. Should the Fed continue to exert pressure on interest rates for longer this will end up hurting the stock market and reduce valuations. Responsible Investors should exercise caution and maintain a healthy proportion of their portfolio in cash and hedges as well as a diversified portfolio with some exposure to the European stock market and to emerging markets.

Weekly Portfolio Update

Here are this week’s movements: we have taken full profits on our Academy Sports and Outdoors short position (+9.8%) and partial profits on our Ross Stores short position (+6.1%) as well as our triple inverse Nasdaq ETF long position (+2.4%). Sells stops were trigger on our HRB short position. Cash, US treasury bills, precious metals and hedges amount to 39% in our portfolio (increased compared to last week).

Top 5 Weekly Portfolio Performers

ProShares UltraPro Short Russell 2000 +11.3% (3x inverse the Russell 2000)

iPath Series B S&P 500 VIX Short-Term Futures TM +10.7% (Volatility ETF)

ProShares UltraPro Short QQQ +8.8% (3x inverse the Nasdaq)

ProShares UltraPro Short Dow 30 +5.1% (3x inverse the Dow)

iShares Silver Trust +2.3% (Silver ETF)

Portfolio Asset Allocation

US stocks long positions 47% (increased)

EU stocks long positions 8.5% (unchanged)

Emerging markets long positions 4.5% (unchanged)

US stocks short positions 1.0% (reduced)

Hedges 7.5% (reduced)

Silver & Gold 2% (unchanged)

US Treasury bills 2% (unchanged)

Cash 27.5% (increased)

1-year Portfolio Performance

Our portfolio performance over the last 12 months is +13.2% (excl. dividends) vs the S&P500 gain of +15.0%.

Invest responsibly!!!

Did the ECB send a bullish signal to the stock market? | Responsible Investor Weekly Newsletter, September 16th, 2023

Responsible Investor is a weekly newsletter and an Apple/Spotify podcast for those who are interested in investing responsibly. Go to responsibleinvestor.dk for more information and to read our disclaimer. This week’s newsletter is titled “Did the ECB send a bullish signal to the stock market?”, and was written on September 16th, 2023.

Weekly summary in a paragraph

The US stock market indices finished mostly lower this week, except the Dow which rose marginally in a week which was affected by a significant sell-off on Friday despite the success of the ARM IPO. The European stock market ended its 6-week negative streak and returned to gains despite the euro continued weakness relative to the dollar. The ECB hiked interest rates by another 0.25%. The 2-10y spread tightened slightly this week and is still inverted at -69 basis points. In economic data, the core inflation (CPI) as well as the inflation at producer level (PPI) are running hotter than expected. Retails sales data were also strong which indicates further borrowing by the consumer. In corporate news, both Adobe and Lennar dipped despite beating Q2 earnings expectations. The launch of the new Apple models and the French ban on the iPhone 12 did not help the stock which fell this week. Despite the vast majority of the S&P500 companies having now reported Q2 earnings, there are still notable ones due to be published next week such as Stitch Fix, Autozone, General Mills, Fedex and Kb Home.

Asset classes weekly performance

This week the Dow finished +0.1% higher (+4.4% year to date) while the S&P500 lost -0.2% (+15.9% year to date), the Nasdaq gave up -0.4% (+31.0% year to date) and the Russell 2000 fell -0.2% (+4.9% year to date). Gold finished -0.1% lower (+1.0% year to date) while Silver lost -0.3% (-7.2% year to date). Crude Oil gained +4.5% (+20.3% year to date). The 10-y US treasury yield rose +0.8% (+14.0% year to date). The European stock market gained +0.8% (+12.9% year to date). The Euro lost -0.52% against the US Dollar (-0.45% year to date).

Weekly pitch

One of the ways central banks fight inflation is through increasing interest rates. Both the Fed and the ECB have been using this weapon over the past months. Following this week’s inflation data, there is now a 40% chance that the Fed will hike again in November. The ECB just hiked interest rates this week though the significant news is that it suggested it may be done for this cycle. This is a bullish signal for the stock market and also for the bonds of the EU member states. Responsible Investors should exercise caution and maintain a healthy proportion of their portfolio in cash and hedges as well as a diversified portfolio with some exposure to the European stock market and to emerging markets.

Weekly Portfolio Update

No movements this week. Cash, US treasury bills, precious metals and hedges amount to 38.5% in our portfolio (unchanged compared to last week). It was a good week for our precious metals stocks.

Top 5 Weekly Portfolio Performers

Sibanye Stillwater +16.7% (Precious metals)

ProShares UltraPro Short QQQ +5.3% (3x inverse the Nasdaq)

MP Materials +4.4% (Rare-earth materials)

Newmont Mining +3.6% (Precious metals)

Denbury Resources +3.3% (Oil)

Portfolio Asset Allocation

US stocks long positions 44.5% (unchanged)

EU stocks long positions 8.5% (unchanged)

Emerging markets long positions 4.5% (unchanged)

US stocks short positions 4.0% (unchanged)

Hedges 8.0% (unchanged)

Silver & Gold 2% (unchanged)

US Treasury bills 2% (unchanged)

Cash 26.5% (unchanged)

1-year Portfolio Performance

Our portfolio performance over the last 12 months is +11.8% (excl. dividends) vs the S&P500 gain of +14.1%.

Invest responsibly!!!

Which three factors are putting pressure on the stock market? | Responsible Investor Weekly Newsletter, September 9th, 2023

Responsible Investor is a weekly newsletter and an Apple/Spotify podcast for those who are interested in investing responsibly. Go to responsibleinvestor.dk for more information and to read our disclaimer. This week’s newsletter is titled “Which three factors are putting pressure on the stock market?”, and was written on September 9th, 2023.

Weekly summary in a paragraph

The US stock market indices finished lower this week, with the Russell 2000 and the Nasdaq underperforming the other indices in a shorter week of trading. The European stock market dropped significantly on stagflation fears due to weak economic data and rising oil prices. The 2-10y spread widened slightly this week and is still inverted at -72 basis points. In economic data, the ISM non-manufacturing index came in higher than expected: while this is good for the economy it may signal that inflation is picking up again which would be bad news for the stock market. In corporate news, Kroger and DocuSign beat Q2 earnings expectations. The Apple stock is under pressure on news of the Chinese government banning government workers from using iphones for official work. Despite the vast majority of the S&P500 companies having now reported Q2 earnings, there are still notable ones due to be published next week such as Oracle, Adobe and Lennar.

Asset classes weekly performance

This week the Dow finished -0.4% lower (+4.3% year to date) while the S&P500 lost -1.1% (+16.1% year to date), the Nasdaq gave up -2% (+31.5% year to date) and the Russell 2000 tanked -2.5% (+5.1% year to date). Gold finished -0.5% lower (+0.9% year to date) while Silver lost -2.8% (-7.6% year to date). Crude Oil gained +0.6% (+15.1% year to date). The 10-y US treasury yield gave up -0.2% (+12.3% year to date). The European stock market lost -2.8% (+12.0% year to date). The Euro lost -0.69% against the US Dollar (-0.1% year to date).

Weekly pitch

Rising oil, rising yields, and rising dollar are putting downward pressure on the stock markets. Oil prices have had a good run lately mostly due to cuts announced by Russia and Saudi Arabia: this is an inflationary situation. Rising yield are tough for long-duration stocks and negatively impact on investments. A rising dollar puts pressure on the emerging markets and reduces the appeal of US exports. If these weren’t enough, weakness in some of the stocks which have a significant market share in China are also behind this week’s drop in the stock market. Responsible Investors should exercise caution and maintain a healthy proportion of their portfolio in cash and hedges as well as a diversified portfolio with some exposure to the European stock market and to emerging markets.

Weekly Portfolio Update

Here are this week’s movements: we have closed our long position on Desktop Metal (+8.1%). We have also initiated long positions on STEM, Kenvue and Gilead Sciences as well as short positions on Academy Sports and Outdoors, Ross Stores and H&R Block. Cash, US treasury bills, precious metals and hedges amount to 38.5% in our portfolio (reduced compared to last week).

Top 5 Weekly Portfolio Performers

ProShares UltraPro Short Russell 2000 +11.5% (3x inverse the Russell 2000)

Centene +6.8% (Managed Healthcare)

ProShares UltraPro Short QQQ +4.3% (3x inverse the Nasdaq)

Halliburton +3.7% (Oil Services)

Denbury Resources +2.6% (Oil)

Portfolio Asset Allocation

US stocks long positions 44.5% (increased)

EU stocks long positions 8.5% (unchanged)

Emerging markets long positions 4.5% (unchanged)

US stocks short positions 4.0% (increased)

Hedges 8.0% (unchanged)

Silver & Gold 2% (unchanged)

US Treasury bills 2% (unchanged)

Cash 26.5% (reduced)

1-year Portfolio Performance

Our portfolio performance over the last 12 months is +9.0% (excl. dividends) vs the S&P500 gain of +11.3%.

Invest responsibly!!!

Weak income and high spending: how long can this continue? | Responsible Investor Weekly Newsletter, September 2nd, 2023

Responsible Investor is a weekly newsletter and an Apple/Spotify podcast for those who are interested in investing responsibly. Go to responsibleinvestor.dk for more information and to read our disclaimer. This week’s newsletter is titled “Weak income and high spending: how long can this continue?”, and was written on September 2nd, 2023.

Weekly summary in a paragraph

The US stock market indices finished higher this week, with the Russell 2000 and the Nasdaq outperforming the other indices. The jump in oil contributed to an overall bullish week. The European stock market finished higher despite news of resuming inflation in some of its member states. The 2-10y spread shrunk significantly this week and is still inverted at -69 basis points. In economic data, the jobs reports were mixed while core PCE came in as expected at 0.2% month-over-month and 4.2% year-over-year. In corporate news, Lululemon beat Q2 earnings expectations while Nio missed. There were also strong earnings from various tech stocks including Salesforce. Despite the vast majority of the S&P500 companies having now reported Q2 earnings, there are still notable ones due to be published next week such as Dave & Buster’s, DocuSign and Kroger.

Asset classes weekly performance

This week the Dow finished +1.4% higher (+5.1% year to date) while the S&P500 gained +2.5% (+17.6% year to date), the Nasdaq advanced +3.3% (+34.1% year to date) and the Russell 2000 was +3.6% stronger (+9.1% year to date). Gold finished +1.0% higher (+2.1% year to date) while Silver lost -1.6% (-3.6% year to date). Crude Oil jumped +7.4% (+13.5% year to date). The 10-y US treasury yield gave up -0.9% (+10.0% year to date). The European stock market gained +0.6% (+14.4% year to date). The Euro lost -0.19% against the US Dollar (+0.6% year to date).

Weekly pitch

Perhaps the most relevant piece of economic data published this week relates to the consumer: personal income came in lower than expected while personal spending was higher than consensus. For how long can this continue? Perhaps it is due to the strong consumer spending that a recession has been averted so far. The Delinquency Rate on Credit Card Loans is at the highest level since late 2012. The US economy is 70% consumer-based: any signs of inversion in spending may spook investors and send the markets lower. Responsible Investors should exercise caution and maintain a healthy proportion of their portfolio in cash and hedges as well as a diversified portfolio with some exposure to the European stock market and to emerging markets.

Weekly Portfolio Update

No movements this week. Cash, US treasury bills, precious metals and hedges amount to 42.5% in our portfolio (unchanged compared to last week).

Top 5 Weekly Portfolio Performers

Foot Locker +15.5% (Footware retail)

Desktop Metal +14.8% (Electronic Technology)

The Gap +14.1% (Apparel)

Callon Petroleum +10.5% (Oil)

MP Materials +9.6% (Non energy minerals)

Portfolio Asset Allocation

US stocks long positions 44.0% (unchanged)

EU stocks long positions 8.5% (unchanged)

Emerging markets long positions 4.5% (unchanged)

US stocks short positions 0.5% (unchanged)

Hedges 8.0% (unchanged)

Silver & Gold 2% (unchanged)

US Treasury bills 2% (unchanged)

Cash 30.5% (unchanged)

1-year Portfolio Performance

Our portfolio performance over the last 12 months is +11.6% (excl. dividends) vs the S&P500 gain of +13.8%.

Invest responsibly!!!

What’s up with emerging markets? | Responsible Investor Weekly Newsletter, August 26th, 2023

Responsible Investor is a weekly newsletter and an Apple/Spotify podcast for those who are interested in investing responsibly. Go to responsibleinvestor.dk for more information and to read our disclaimer. This week’s newsletter is titled “What’s up with emerging markets?”, and was written on August 26th, 2023.

Weekly summary in a paragraph

The US stock market indices were mixed this week, with the Dow and the Russell 2000 finishing lower while the S&P500 and the Nasdaq halted the last three weeks’ downward trend. The European stock market finished marginally higher though this was muted by a marked drop of the Euro relative to the US Dollar. The 2-10y spread widened significantly this week and is still inverted at -78 basis points. The Fed symposium at Jackson Hole did not provide any clear signal on the short-term policy as Powell will continue to rely on economic data. The next FOMC meeting is in September. Economic data included initial jobless claims which came in lower than expected and durable goods which was mixed. In corporate news, Nvidia smashed Q2 earnings expectations while Foot locker cratered after a significant miss. Despite the vast majority of the S&P500 companies having now reported Q2 earnings, there are still notable ones due to be published next week such as Nio, Salesforce, Lululemon and Broadcom.

Asset classes weekly performance

This week the Dow finished -0.5% lower (+3.6% year to date) while the S&P500 gained +0.8% (+14.8% year to date), the Nasdaq advanced +2.3% (+29.9% year to date) and the Russell 2000 was -0.3% weaker (+5.3% year to date). Gold finished +1.1% higher (+0.9% year to date) while Silver jumped +4.1% (-2.1% year to date). Crude Oil depreciated -0.1% (+5.6% year to date). The 10-y US treasury yield gave up -2.4% (+11.8% year to date). The European stock market gained +0.2% (+13.6% year to date). The Euro lost -0.72% against the US Dollar (+0.8% year to date).

Weekly pitch

Emerging markets offer a tremendous opportunity to invest in countries that are fast-developing as well as to diversify one’s portfolio. Rather that stock-picking, a more efficient way of doing so is purchasing country-specific ETFs. From this week onwards Responsible Investor will declare the percentage allocation in emerging market ETFs. At the moment the Responsible Investor portfolio holds four emerging markets ETFs: Vietnam, Thailand, China and Brazil. BRICS, a collective consisting of Brazil, Russia, India, China and South Africa are looking to expand by adding 40 countries and to attack the US dollar. Responsible Investors should exercise caution and maintain a healthy proportion of their portfolio in cash and hedges as well as a diversified portfolio with some exposure to the European stock market and to emerging markets.

Weekly Portfolio Update

Here are this week’s movements: we have taken full profits on our Thor Industries (+9.8%) and Array Technologies (+7.1%) short positions. We have also accumulated and completed our Hershey’s long position. Sell stops were triggered on our World Wrestling Entertainment short position and on our Tellurian long position. Cash, US treasury bills, precious metals and hedges amount to 42.5% in our portfolio (reduced compared to last week).

Top 5 Weekly Portfolio Performers

Sibanye Stillwater +10.5% (Precious Metals)

iShares Silver Trust +6.5% (Silver ETF)

Ørsted A/S +4.4% (Green Energy)

Thailand Index MSCI iShares +4.2% (Thailand ETF)

Brazil Index MSCI iShares +2.6% (Brazil ETF)

Portfolio Asset Allocation

US stocks long positions 44.0% (increased)

EU stocks long positions 8.5% (unchanged)

Emerging markets long positions 4.5% (unchanged)

US stocks short positions 0.5% (reduced)

Hedges 8.0% (unchanged)

Silver & Gold 2% (unchanged)

US Treasury bills 2% (unchanged)

Cash 30.5% (increased)

1-year Portfolio Performance

Our portfolio performance over the last 12 months is +9.5% (excl. dividends) vs the S&P500 gain of +4.9%, which corresponds to a +4.6% market beat.

Invest responsibly!!!

Is the recent correction just driven by raising interest rates? | Responsible Investor Weekly Newsletter, August 19th, 2023

Responsible Investor is a weekly newsletter and an Apple/Spotify podcast for those who are interested in investing responsibly. Go to responsibleinvestor.dk for more information and to read our disclaimer. This week’s newsletter is titled “Is the recent correction just driven by raising interest rates”, and was written on August 19th, 2023.

Weekly summary in a paragraph

The US stock market indices tanked this week, with all major indices finishing lower, most of them for the third week in a row. The European stock market’s downward move was even worse and exacerbated by the Euro depreciating relative to the US Dollar: it has been overtaken by the S&P500 (currency adjusted) for the first time this year. The 2-10y spread reduced significantly this week as long duration yields increased and is still inverted at -66 basis points. The minutes of the last FOMC meeting had a bearish slant. Economic data were mixed with Atlanta Fed GDP standing at 5% versus 4.1% prior and NAHB Housing Market Index coming in at 50 versus 56 consensus. In corporate news, Q2 earnings of Applied Materials beat expectations. There was also a number of strong reports from retail stocks such as Walmart, Home Depot and Target. Despite the vast majority of the S&P500 companies having now reported Q2 earnings, there are still notable ones due to be published next week such as Nvidia, Zoom, Foot Locker and The Gap.

Asset classes weekly performance

This week the Dow finished -2.2% lower (+4.1% year to date) while the S&P500 lost -2.1% (+13.8% year to date), the Nasdaq depreciated -2.6% (+27.0% year to date) and the Russell 2000 was -3.4% weaker (+5.6% year to date). Gold finished -1.3% lower (-0.4% year to date) while Silver gained +0.41% (-8.1% year to date). Crude Oil depreciated -1.4% (+6.8% year to date). The 10-y US treasury yield gained +1.6% (+12.1% year to date). The European stock market fell -3.2% (+13.4% year to date). The Euro lost -0.64% against the US Dollar (+1.5% year to date).

Weekly pitch

When bond yields rise, stocks typically experience a sell-off as investors are lured into putting their savings to work at a relatively low risk. The recent weakness in the stock market may well have been driven by the longer term bond yield rising, but there may be other reasons to justify three consecutive weeks of softness. Last week we warned about the implications of the sharp drop in China’s exports. This week’s focus is on the ailing Chinese housing market which culminated with the news of the country’s largest developer Evergrande filing for bankruptcy on Friday. Chinese bonds have not done well lately and the same applies to Chinese stocks. Until this correction is over, Responsible Investors should exercise caution and maintain a healthy proportion of their portfolio in cash and hedges as well as a diversified portfolio with some exposure to the European stock market.

Weekly Portfolio Update

Here are this week’s movements: we have taken full profits on our Molson Coors Brewing short position (+9.7%). We have also initiated a long position on Desktop Metal and accumulated on our Brazil ETF, Newmont Mining and Hershey’s long positions. Sell stops were triggered on our Zimmer Biomet Holdings long position. Cash, US treasury bills, precious metals and hedges amount to 44% in our portfolio (reduced compared to last week). It is mostly thanks to our hedges that we beat the market by +1.0% this week.

Top 5 Weekly Portfolio Performers

ProShares UltraPro Short Russell 2000 +10.7% (3x inverse Russell 2000 ETF)

iPath Series B S&P 500 VIX Short-Term Futures ETN +8.1% (Volatility ETN)

ProShares UltraPro Short QQQ +7.9% (3x inverse Nasdaq ETF)

ProShares UltraPro Short Dow30 +6.8% (3x inverse Dow Jones ETF)

ProShares Short QQQ +2.4% (1x inverse Nasdaq ETF)

Portfolio Asset Allocation

US stocks long positions 47.5% (increased)

EU stocks long positions 8.5% (unchanged)

US stocks short position 2.5% (reduced)

Hedges 8.0% (unchanged)

Silver & Gold 2% (unchanged)

US Treasury bills 2% (unchanged)

Cash 29.5% (unchanged)

1-year Portfolio Performance

Our portfolio performance over the last 12 months is +8.0% (excl. dividends) vs the S&P500 gain of +2.0%, which corresponds to a 6.0% market beat.

Invest responsibly!!!

What are the risks of a China-dependent portfolio? | Responsible Investor Weekly Newsletter, August 12th, 2023

Responsible Investor is a weekly newsletter and an Apple/Spotify podcast for those who are interested in investing responsibly. Go to responsibleinvestor.dk for more information and to read our disclaimer. This week’s newsletter is titled “What are the risks of a China-dependent portfolio?”, and was written on August 12th, 2023.

Weekly summary in a paragraph

The US stock market indices were mixed this week, with all major indices finishing lower except the Dow sustained by the energy, financial and industrial sectors. The European stock market managed to stay afloat with no significant economic data to move the needle. The 2-10y spread was flat and is still inverted at -73 basis points. In economic data CPI and PPI data ended up being a non-event as the reports were substantially in line with expectations, while labour market data showed some signs of weakness. In corporate news, 34 S&P500 companies reported Q2 earnings with Disney missing estimates though finishing higher on future subscription prices hike, and Novo Nordisk crushing expectations. Despite 95% of the S&P500 companies having now reported Q2 earnings, there are still some notable ones due to be published next week such as John Deere, Home Depot, Target and Applied Materials.

Asset classes weekly performance

This week the Dow finished +0.6% higher (+6.4% year to date) while the S&P500 lost -0.3% (+16.3% year to date), the Nasdaq depreciated -1.9% (+30.4% year to date) and the Russell 2000 was -1.7% weaker (+9.3% year to date). Gold finished -1.2% lower (+1.0% year to date) while Silver slid -2.1% (-8.3% year to date). Crude Oil appreciated +1.3% (+8.9% year to date). The 10-y US treasury yield gained +2.2% (+9.9% year to date). The European stock market was flat at +0.1% (+17.1% year to date). The Euro lost -0.46% against the US Dollar (+2.3% year to date).

Weekly pitch

There is generally more focus on the CPI compared to the PPI reports. This unbalance is unjustified and especially so considering the reports published last week. The PPI report actually came in hotter than expected which suggests two arguments: first, inflation is still not under control and is likely to stay at these levels for longer than expected; second, the sharp drop in China’s exports may be a reflection of the deglobalisation narrative which explains sustained inflation levels. Further uncertainty comes from the growing geopolitical tension between the US and China, particularly as the odds of an invasion of Taiwan are rising. The markets do not like uncertainty and therefore Responsible Investors should exercise caution and maintain a healthy proportion of their portfolio in cash and hedges as well as a diversified portfolio with some exposure to the European stock market.

Weekly Portfolio Update

Here are this week’s movements: we have taken full profits on our Microsoft (+5.5%) long position. We have also initiated long positions on a Brazil ETF as well as a short position on Array Technologies. Cash, US treasury bills, precious metals and hedges amount to 45% in our portfolio (increased compared to last week).

Top 5 Weekly Portfolio Performers

Novo Nordisk +15.9% (Pharma)

ProShares UltraPro Short Russell 2000+5.3% (3x inverse Russell 2000 ETF)

ProShares UltraPro Short QQQ +5.1% (3x inverse Nasdaq ETF)

Denbury Resources +4.0% (Integrated Oil)

Disney +3.2% (Entertainment)

Portfolio Asset Allocation

US stocks long positions 46.5% (reduced)

EU stocks long positions 8.5% (unchanged)

US stocks short position 3.5% (increased)

Hedges 8.0% (unchanged)

Silver & Gold 2% (unchanged)

US Treasury bills 2% (unchanged)

Cash 29.5% (increased)

1-year Portfolio Performance

Our portfolio performance over the last 12 months is +8.3% (excl. dividends) vs the S&P500 gain of +6.1%, which corresponds to a 2.2% market beat.

Invest responsibly!!!