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!!!

Apple’s earnings decline again: third time unlucky? | Responsible Investor Weekly Newsletter, August 5th, 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 “Apple’s earnings decline again: third time unlucky?”, and was written on August 5th, 2023.

Weekly summary in a paragraph

The US stock market indices were lower this week, as all the major indices were spooked by Fitch downgrading to AA+ the US national debt and by mixed labour market data. The European stock market was also weaker on negative sentiment caused by poor Q2 earnings and 2024 forecasts. The 2-10y spread shrunk again and significantly this week, but it is still inverted at -73 basis points. The Bank of England raised interest rates to a new 15-year high, warning that its fight against inflation may require tighter borrowing conditions for a longer period. In corporate news, one third of the S&P500 companies reported Q2 earnings with Amazon beating and Apple underwhelming investors. Next week more S&P500 companies will report Q2 earnings, including Disney, UPS and Novo Nordisk to name a few.

Asset classes weekly performance

This week the Dow finished -1.1% lower (+5.8% year to date) while the S&P500 lost -2.3% (+16.6% year to date), the Nasdaq depreciated -2.9% (+32.9% year to date) and the Russell 2000 was -1.2% weaker (+11.1% year to date). Gold finished -1.5% lower (+2.7% year to date) while Silver slid -5.0% (-4.4% year to date). Crude Oil appreciated +1.0% (+8.4% year to date). The 10-y US treasury yield gained +2.6% (+7.0% year to date). The European stock market tanked -3.8% (+16.7% year to date). The Euro lost -0.1% against the US Dollar (+2.8% year to date).

Weekly pitch

We don’t typically feature individual stocks in the weekly pitch: the comments on Apple that follow are meant to illustrate the link between earnings and stock prices. As a general, well-established trend, stock prices follow earnings and earnings expectations. Last Thursday Apple reported the third consecutive quarterly decline in sales in a row. While the Services income reached an all time high, the decline in overall earnings may put pressure on the stock price, at least until the new lineup of models is presented in September. Responsible Investor has owned Apple on and off over the years (mostly on!), though we are not buyers at these levels. Responsible investors should review their positions during the earnings season, 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 Draftkings (+52.9%), Yelp (+28.4%) and Range Resources (+14.3%) long positions and partial profits on our KWEB (+10.5%) long position. We have accumulated our Zimmer Biomet Holdings long position and initiated long positions on Newmont Mining, Hershey’s and Gilead Sciences as well as a short position on XPO Logistics. Cash, US treasury bills, precious metals and hedges amount to 43.5% in our portfolio (reduced compared to last week).

Top 5 Weekly Portfolio Performers

iPath Series B S&P500 VIX Short-Term Futures +12.8% (Volatility ETN)

ProShares UltraPro Short QQQ +9.5% (3x inverse Nasdaq ETF)

Duerr AG +4.5% (Industrial Machinery)

ACI Worldwide +4.4% (Packaged Software)

Halliburton +3.6% (Oil Services)

Portfolio Asset Allocation

US stocks long positions 48% (increased)

EU stocks long positions 8.5% (unchanged)

US stocks short position 2.5% (unchanged)

Hedges 8.0% (unchanged)

Silver & Gold 2% (unchanged)

US Treasury bills 2% (unchanged)

Cash 29% (reduced)

1-year Portfolio Performance

Our portfolio performance over the last 12 months is +11.3% (excl. dividends) vs the S&P500 gain of +7.9%, which corresponds to a 3.4% market beat.

Invest responsibly!!!

Q2 earnings decline: now what? | Responsible Investor Weekly Newsletter, July 29th, 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 “Q2 earnings decline: now what?”, and was written on July 29th, 2023.

Weekly summary in a paragraph

The US stock market indices were higher this week, with all the major indices advancing on news of generally good earnings and positive economic data. The European stock market was also stronger though this week’s gain was offset by the Euro depreciating relative to the US Dollar. The 2-10y spread shrunk after two weeks of widening and is still inverted at -91 basis points. Economic data this week included the FED’s decision to hike by another 0.25%, as widely expected, and core PCE continuing to decelerate. The Bank of Japan surprised markets by announcing it first shift from a decade-long period of monetary easing. In corporate news, one third of the S&P500 companies reported Q2 earnings season with notable beats from Meta, Google and Intel. On the flipside, Procter & Gamble’s 2024 outlook disappointed and Chipotle’s earnings were mixed. Next week 170 S&P500 companies report Q2 earnings, including Apple, AMD, Amazon and Starbucks to name a few.

Asset classes weekly performance

This week the Dow finished +0.7% higher (+7.0% year to date) while the S&P500 gained +1.0% (+19.3% year to date), the Nasdaq jumped +2.0% (+36.8% year to date) and the Russell 2000 was +1.1% stronger (+12.5% year to date). Gold finished -0.2% lower (+3.7% year to date) while Silver slid -1.4% (-1.4% year to date). Crude Oil appreciated +1.3% (+5.8% year to date). The 10-y US treasury yield gained +1.5% (+4.6% year to date). The European stock market gave up +0.7% (+21.6% year to date). The Euro lost -0.95% against the US Dollar (+2.9% year to date).

Weekly pitch

With 51% of the S&P500 companies having reported Q2 earnings so far, an attempt to draw some preliminary conclusions can be made. Q2 earnings decline is presently -7.3%, lower than expectations of -7.0% at the beginning of the quarter. If this figure is confirmed, it would be the third quarterly earnings decline in a row and the highest since the disastrous Q2 2020 which was due to the pandemic. Even if the forecasted earnings growth in Q3 and Q4 were confirmed, the expected earnings growth for 2023 is a meager +0.4%. 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 partial profits on our Meta (+129%) and Campari (+19.3%) long positions. We have accumulated our Disney, Raytheon and Zimmer Biomet Holdings long positions and initiated a short position on Molson Coors Brewing. Stop losses were triggered on our XPO Logistics, Rivian and Overstock short positions. Cash, US treasury bills, precious metals and hedges amount to 44.5% in our portfolio (unchanged compared to last week).

Top 5 Weekly Portfolio Performers

The Gap +13.4% (Apparel)

KraneShares CSI China Internet +12.7% (Internet services Chinese companies ETF)

Meta +10.6% (Tech)

Google +10.6% (Tech)

Yelp +9.0% (Tech)

Portfolio Asset Allocation

US stocks long positions 47% (unchanged)

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 30% (increased)

1-year Portfolio Performance

Our portfolio performance over the last 12 months is +11.9% (excl. dividends) vs the S&P500 gain of 12.5%.

Invest responsibly!!!

Where have all the bears gone? | Responsible Investor Weekly Newsletter, July 22nd, 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 “Where have all the bears gone?”, and was written on July 22nd, 2023.

Weekly summary in a paragraph

The US stock market indices were mixed this week, with all the major indices advancing except the Nasdaq which finished lower. The European stock market was also weaker and move was further affected by the Euro depreciating relative to the US Dollar. The 2-10y spread continues to widen for the second week in a row and is still inverted at -98 basis points. Economic data this week included the aforementioned CPI report on Wednesday as well as the PPI report on Thursday which decelerated to +2.4% year on year. In corporate news, sixty S&P500 companies reported Q2 earnings season with notable misses from TSMC and Netflix. Thus far the earnings have been mixed but it is too early to draw any conclusions. Next week 166 S&P500 companies report Q2 earnings, including Meta, Google, Visa and Hilton to name a few.

Asset classes weekly performance

This week the Dow finished +2.1% higher (+6.3% year to date) while the S&P500 gained +0.7% (+18.2% year to date), the Nasdaq lost -0.6% (+34.1% year to date) and the Russell 2000 was +1.5% stronger (+11.3% year to date). Gold finished -0.9% lower (+3.7% year to date) while Silver slid -1.9% (-0.1% year to date). Crude Oil appreciated +1.6% (+0.8% year to date). The 10-y US treasury yield gained +1.3% (+1.2% year to date). The European stock market gave up -0.6% (+20.8% year to date). The Euro lost +0.9% against the US Dollar (+3.9% year to date).

Weekly pitch

The stock market has had a great run over the past 6+ months. Valuation are very stretched and most indices are overbought. After the Nasdaq100 and the S&P500, the Dow Jones has finally broken out. The situation really does beg the question: where have last years’ bears gone? AI frenzy, near-peak interest rate policy and other factors have sustained the market thus far. Q2 earnings and 2024 earnings expectations will be key to determine the market’s direction from here. Until then, 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 initiated a short position on Thor Industries and Rivian. Stop losses were triggered on our XPO Logistics and JNJ short positions. Cash, US treasury bills, precious metals and hedges amount to 44.5% in our portfolio (unchanged compared to last week).

Top 5 Weekly Portfolio Performers

Bank of America +9.9% (Banking)

Yelp +8.0% (Tech)

Centene +7.6% (Healthcare)

Range Resources +5.6% (Oil)

Bristol Myers Squibb +4.4% (Pharma)

Portfolio Asset Allocation

US stocks long positions 47% (unchanged)

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% (decreased)

1-year Portfolio Performance

Our portfolio performance over the last 12 months is +12.8% (excl. dividends) vs the S&P500 gain of 13.4%.

Invest responsibly!!!

Nasdaq rebalancing: much ado about nothing? | Responsible Investor Weekly Newsletter, July 15th, 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 “Nasdaq rebalancing: much ado about nothing?”, and was written on July 15th, 2023.

Weekly summary in a paragraph

The US stock market indices finished higher this week, with all the major indices reversing previous week’s losses. The better than expected CPI report was largely behind the move. The European stock market outperformed the US stock market and this gain was enhanced by the Euro appreciating relative to the US Dollar. The 2-10y spread resumed is widening after last week’s reversal and is still inverted at -91 basis points. Economic data this week included the aforementioned CPI report on Wednesday as well as the PPI report on Thursday which decelerated to +2.4% year on year. In corporate news, US major banks JP Morgan and Wells Fargo unofficially kicked off the Q2 earnings season and reported a beat on Friday, while Citi disappointed with a weaker-than-expected rebound in investment banking activity. Amazon’s shares leapt 3% after announcing the first 24 hours of its ‘Prime Day’ was their largest sales day ever. Next week 60 S&P500 companies report Q2 earnings, including ASML, Alcoa, Bank of America and Netflix.

Asset classes weekly performance

This week the Dow finished +2.3% lower (+4.1% year to date) while the S&P500 gained +2.4% (+17.3% year to date), the Nasdaq rose +3.3% (+34.9% year to date) and the Russell 2000 was +3.6% stronger (+9.6% year to date). Gold finished +1.2% higher (+3.5% year to date) while Silver jumped +8.1% (+1.4% year to date). Oil appreciated +0.6% (-1.8% year to date). The 10-y US treasury yield slid -4.1% (+0.7% year to date). The European stock market leapt +5.9% (+21.6% year to date). The Euro gained +2.38% against the US Dollar (+4.9% year to date).

Weekly pitch

The Nasdaq100 index has never seen such a high concentration of its top 10 stocks which exceed 60% of its market capitalisation. Earlier this week a ‘special rebalance’ has been announced which will reduce the relative weight of it top 5 stocks: Apple, Nvidia, Amazon, Tesla and Microsoft. Their total weight of 46% will be brought down to 40%. Even considering the 24 ETFs tracking the Nasdaq-100 index who will be forced to sell to match the rebalance, the impact is expected to be quite small based on the on the rebalance alone. The valuations of these tech giants are very high, 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 took profits on our Nvidia (+18.1%) and our Restaurants Brands International long position (+5.9%). We closed the position on Thor’s spin-off Phinia which resulted in 2400-bagger! We have also initiated a short position on XPO Logistics. A stop loss was triggered on our Lennar short position. Cash, US treasury bills, precious metals and hedges amount to 44.5% in our portfolio (increased compared to last week).

Top 5 Weekly Portfolio Performers

DraftKings +14.4% (Entertainment)

Sibanye Stillwater +12.7% (Precious Metals)

Halliburton +6.6% (Oilfield Services)

The Gap +6.6% (Apparel)

Meta +6.5% (Tech)

Portfolio Asset Allocation

US stocks long positions 47% (reduced)

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 30% (increased)

1-year Portfolio Performance

Our portfolio performance over the last 12 months is +14.4% (excl. dividends) vs the S&P500 gain of 18.9%.

Invest responsibly!!!

Is the market more worried about inflation or recession? | Responsible Investor Weekly Newsletter, July 8th, 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 market more worried about inflation or recession?”, and was written on July 8th, 2023.

Weekly summary in a paragraph

The US stock market indices finished lower this week, with all the major indices giving up most of last week’s gains. Volume was lower as the summer season kicked off with Independence Day.

The European stock market underperformed the US stock market though the Euro appreciated relative to the US Dollar.

The 2-10y spread reduced after weeks of widening but is still inverted at -88 basis points.

Economic data this week included a weaker than expected jobs report which fuelled a rebound in stocks on Friday.

In corporate news, Meta’s new Threads, a competitor of Twitter, beat expectations in terms of initial subscribers while Samsung announced a concerning profit-warning.

Next week Q2 earnings kick off with some of the large US banks reporting, such as JP Morgan Chase, City and Wells Fargo. Delta and Unitedhealth are reporting also.

Asset classes weekly performance

This week the Dow finished -2.0% lower (+2.1% year to date) while the S&P500 lost -1.2% (+15.0% year to date), the Nasdaq gave up -0.9% (+31.3% year to date) and the Russell 2000 was -1.3% weaker (+7.8% year to date). Gold finished +0.2% higher (+4.7% year to date) while Silver gained +1.4% (-3.3% year to date). Oil jumped +4.4% (-4.0% year to date). The 10-y US treasury yield gained +5.8% higher (+6.0% year to date). The European stock market lost -2.8% (+18.8% year to date). The Euro gained +0.5% against the US Dollar (+2.9% year to date).

Weekly pitch

The stock market did not have much data to justify an up week which meant that down was the path of least resistance. This week two main events are expected to shape the market: the all-important CPI report on Wednesday and the first significant group of large US banks reporting their Q2 earning on Friday. Any match or exceedance of the CPI expectation is likely to send the market higher in the short term. Q2 earnings and earnings forecasts for 2024 will govern long term market moves. Until the current Q2 earnings expectations are confirmed, 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 took profits on our Dish Network (+10%) and our MP long position (+5.2%). We have also initiated a 2% long position on 1 to 3 year US Bonds which seem attractive at near-peak interest rates. Cash, US treasury bills, precious metals and hedges amount to 43% in our portfolio (increased compared to last week).

Top 5 Weekly Portfolio Performers

Tellurian +17.4% (Energy Minerals)

Halliburton +14.9% (Oilfield Services)

DraftKings +14.9% (Entertainment)

Range Resources +6.7% (Oil)

Marriott International +6.4% (Hotels)

Portfolio Asset Allocation

US stocks long positions 48.5% (reduced)

EU stocks long positions 8.5% (unchanged)

US stocks short position 3% (increased)

Hedges 8.0% (unchanged)

Silver & Gold 2% (unchanged)

US Treasure bills 2% (initiated)

Cash 28% (reduced)

1-year Portfolio Performance

Our portfolio performance over the last 12 months is +12.9% (excl. dividends) vs the S&P500 gain of +12.7%, which corresponds to a 0.2% market beat.

Invest responsibly!!!

What is ‘window dressing’ and why does it matter? | Responsible Investor Weekly Newsletter, July 1st, 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 is ‘window dressing’ and why does it matter?”, and was written on July 1st, 2023.

Weekly summary in a paragraph

The US stock market indices finished higher this week, with all the major indices recovering after last week’s decline. The Nasdaq has had the best first half of the year ever. The European stock market outperformed the US stock market as the Eurozone flash PMI came in lower than expected, and is ahead of the S&P500 for the third quarter in a row. The 2-10y spread continues to widen and has now an inverted value of -106 basis points. Economic data published this week was mostly positive. In speaking at an event in Europe, Powell stated that future hikes are still a possibility. In corporate news, Carnival beat expectations while Nike and Micron missed. No major earnings reports next week. The Q2 earnings seasons kicks off week after next with some of the largest US banks reporting on Friday the 14th of July.

Asset classes weekly performance

This week the Dow finished +2.02% higher (+3.8% year to date) while the S&P500 gained +2.35% (+15.9% year to date), the Nasdaq soared +2.19% (+31.7% year to date) and the Russell 2000 jumped +3.68% (+7.2% year to date). Gold finished +0.2% higher (+1.8% year to date) while Silver gave up -0.7% (-7.4% year to date). Oil gained +4.1% (-8.1% year to date). The 10-y US treasury yield was +1.35% higher (+0.69% year to date). The European stock market gained+3.6% (+18.8% year to date). The Euro lost -0.1% against the US Dollar (+1.8% year to date).

Weekly pitch

There wasn’t enough in the economic data reports to sustain the rally that all major indices experienced this week. The end of Q2, however, meant that fund managers were busy with the so-called ‘window dressing‘, an investment practice whereby money managers sell laggards in their portfolio and buy stocks which have had a good run. That way, their portfolios appear to be full of winners. Fund managers move a lot of money in the markets and window dressing may have masked what would have otherwise been a quiet week. Until the current Q2 earnings expectations are confirmed, 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 took partial profits on our Campari long position (+22%), as well as full profits on our ASX long position (+6.5%) and our UPS short position (+4.4%); a stop loss was triggered on our Thor short position. Cash, precious metals and hedges amount to 42% in our portfolio (increased compared to last week).

Top 5 Weekly Portfolio Performers

Callon Petroleum +9.6% (Oil)

Dish Network +9.5% (Cable/Satellite TV)

BorgWarner +8.1% (Trucks)

Marriott +7.1% (Hotels)

ACI Worldwide +7.0% (Tech)

Portfolio Asset Allocation

US stocks long positions 49.5% (unchanged)

EU stocks long positions 8.5% (reduced)

US stocks short position 2% (unchanged)

Hedges 8.0% (unchanged)

Silver & Gold 2% (unchanged)

Cash 30% (increased)

1-year Portfolio Performance

Our portfolio performance over the last 12 months is +14.0% (excl. dividends) vs the S&P500 gain of +16.5%.

Invest responsibly!!!