Tag: Brazil

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!!!

November 7th, 2022 | Does the recent election in Brazil offer an investment opportunity? | $EWZ $PBR $VALE $SQQQ $FCX $SLV $CPE $CBOE $SBSW $KO $AAPL $GOOG $META $MSFT $MP $NEM $CPE $ORSTED.CO

Weekly summary in a paragraph

A slew of positive economic data and a consistently hawkish Fed sent the US stock market lower this week. Despite indications that the next Fed’s interest rate hike may be contained to 0.5% after this week’s 0.75% increase, the jobs market is still too strong and inflation does not seem to slow down enough for the Fed to change its course such that the tightening monetary policy is limiting any upside potential at least in the short term.

On the other side of the pond, the European stock market staged the second week of gains.

Asset classes weekly performance

This week the Dow lost -1.4% (-11.9% YTD) while the S&P500 gave up -3.3% of gains (-20.9% YTD, we are 1x short), the Nasdaq tanked -5.6% (-33.9% YTD, we have a 3x inverse position) and the Russell 2000 lost -2.4% (-20.9% YTD, we are 1x short). $Gold gained +2.2% (-11.2% YTD) while silver skyrocketed +8.5% (-16.6% YTD). $Oil rose 4.9%. The 20-y recovered +5.7% this week (-35.3% YTD). The European stock market rose +1.3% (-28.3% YTD). The Euro finished flat against the USD (-13.3% YTD).

Weekly pitch

Following the marginal win of former president Lula, Brazil presents itself as more attractive economy to foreign investors. Additionally, rising oil prices are lifting the stock market since the Bovespa is heavily weighted on oil stocks such as $PBR which counts as 10% while the mining company $VALE reaches 15%. Former president Bolsonaro has not yet conceded though has signalled that he will collaborate in the transition. Brazil currently looks like an interesting investing opportunity unlike most of the emerging markets.

Weekly Portfolio Update

We initiated a position on the Brazilian stock market $EWZ which is already a profitable trade. We also went long on $USB, a regional US bank. We sold our positions on $PCTY and $FIS. Cash, precious metals and hedges were increased to 38% in our portfolio which beat the market by +2.2% this week.

Here are the top 5 performers of our portfolio this week:

$SQQQ +18.67% (3x inverse Nasdaq ETF)

$FCX +9.29% (Basic Materials-Metal Ores)

$SLV +8.57% (Silver ETF)

$EWZ +7.69% (Brazil Stock Market ETF)

$CPE +5.08% (Energy)

This is our asset allocation as things stand:

– Long stock positions 62% (increased)

– Hedges 9%, though equal to 14% considering leveraged ETFs (unchanged)

– Silver + Gold 3% (unchanged)

– Cash 26% (increased)

Our currency-adjusted YTD portfolio performance is -2.3% (excl. dividends) vs the European market loss of -15.0% (+12.7% market beat).

Invest responsibly!!!

$INDA and $EWZ : two ETFs to invest in G20 stock markets

ETFs are an efficient way of investing in markets or sectors for which one would otherwise have to hold multiple positions to reproduce. This is especially true is you have a limited capital to invest, say up to 10k Euro or Dollars.

We opened a 2% position in $EWZ which reproduces the Brazilian stock market. While the outbreak seems to be nearing the peak only now over there, the stock market fall has been so significant that some of the stocks in that market are greatly undervalued, e.g. Petrobras. As always, we will be vigilant and prepared to act if the outlook changes.

We also hold a 2% position in $INDA which mirrors the Indian stock market. I have opened this one due to a favourable technical pattern, something I do rarely as I am mainly guided by fundamentals when selecting stocks and ETFs.

Brazil and India

At present I have 21 open trades (4 of which at $SQQQ trades bought at different price levels). When I am fully invested, I target having 30-40 open trades with an average percentage of 3% each, though some positions may be higher or smaller depending on the strategy. It is very important to be diversified across the various sectors but also to have enough positions to avoid being severely affected by a major swing in an investment with too high a relative weight. While this limits the potential for greater gains, it does protect you on the downside and makes your portfolio more resilient.

Here are the 4 trades in my eToro portfolio from this past week (May 18th to May 22nd):

  • $AMAT +5%
  • $XLK +2 %
  • $DUE.DE +2% (thanks to the positive Zew numbers in Germany, we might be back)
  • $EWZ +2% (we might be back in this one too)

The US stock market is up about 3% this week and 5 of my positions have outperformed them, namely $KO, $SYF, $USO, $IRM, $VIAV. The European stock markets have also grown by about 2%.

In my eToro portfolio I am 35% in cash, 8% in hedges and the rest are long positions in stocks and, to a lesser extent, ETFs and cryptocurrencies.