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!!!

Please donate for the earthquake in Turkey | Responsible Investor Weekly Newsletter, February 11th, 2023

With such a devastating force of nature and ailing shelters, the havoc wreaked in Turkish left at least 23,000 dead, with the count only poised to grow in the coming days. With news like these nothing financially relevant seems relevant, really. So read what follows lightly and make your hearts heavy with grief for those who fell. Donate if you can.

Weekly summary in a paragraph

US stock markets finished lower on Friday after a 3-week and a 6-week rise for the S&P500 and the Nasdaq, respectively. Value continues to underperform relative to growth. Oil higher mostly due to Russia cutting production by 0.5M barrels. The terminal rate is now expected at 5.15% from 4.9% last Thursday. The 2-10y inversion has reached 80 basis points. Economic data published this week threw a spanner in the works of the disinflationary path: it is very difficult to go from 4 to 2% and the Fed does not seems to backtrack from its 2% target. In corporate news, Disney earnings beat expectations on a cost cutting programme while Google got clobbered by losing an AI competition.

Asset classes weekly performance

This week the Dow finished -0.17% lower (+2.2% year to date) while the S&P500 did worse with a -1.1% decrease (+6.5% year to date, we are 1 time short), the Nasdaq tanked -2.4% (+12.0% year to date, we have a 3 times inverse position) and the Russell 2000 lost as much as -3.4% (+9.0% year to date). Gold finished lower -0.1% (+2.2% year to date, we are long) while Silver was -1.6% weaker (-8.8% year to date, we are long). Oil jumped +8.4% (-0.7% year to date). The 10-y US treasury yield jumped +1.9% this week (-1.3% year to date). The European stock market gave up -1.8% (+11.3% year to date). The Euro finished -1.1% lower against the US Dollar (-0.3% year to date).

Weekly pitch

It was too good to be true, wasn’t it? And often when things are too good to be true they just aren’t. The Nasdaq failed to add a 7th week of consecutive gains and retraced after having delivered what were basically a year’s worth of gains in the first 40 days of 2023.

It is tempting to go all in when markets outperform but it is prudent to either keep profitable positions on a tight leash (do you use automatic sell stops and take profits like we do?) or have cash and hedges in one’s portfolio (see our portfolio asset allocation below). We have beaten the market this week and are protected to the downside should there be more pain coming next week when the January CPI is announced.

Weekly Portfolio Update

Here are this week’s movements: we took profits on Nucor (+9.3%), Qualcomm (+3.2%) and Global Lithium ETF (+7.9%); take profits were triggered on our Pinterest, Peloton, SL Green Realty and Semrush Holdings short positions. Cash, precious metals and hedges amount to 39.5% in our portfolio (increased compared to last week).

Top 5 Weekly Portfolio Performers

ProShares UltraPro Short Russell 2000 +10.8% (3x inverse Russell 2000)

Vix short-term S&P500 future +7.5% (Volatility)

ProShares UltraPro QQQ +6.4% (2x inverse Nasdaq)

Denbury +4.3% (Oil)

Callon Petroleum Company +4.0% (Oil)

Portfolio Asset Allocation

US Long stock positions 44% (reduced)

EU Long stock positions 10% (unchanged)

Short stock position 6.5% (unchanged)

Hedges 7% (unchanged)

Silver & Gold 4% (unchanged)

Cash 28.5% (increased)

Year to date Portfolio Performance

Our year to date portfolio performance is +4.7% (excl. dividends) vs the S&P500 gain of +6.5%.

…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 Apple Podcasts and Spotify.

Invest responsibly!!!

Apple, Google, Amazon and Microsoft disappoint: who is left to save the earnings season? | February 4th, 2023 Newsletter

Weekly summary in a paragraph

Fifth straight week of upside for the Nasdaq despite most of the Q4 earnings reports from the major tech stocks disappointed, the exception being Meta (which we own). Ford, Qualcomm and Starbucks also missed. The Fed confirmed the expected quarter point rate hike on Wednesday and Powell came across as relatively dovish during the press conference. The most notable data point of the week was the January nonfarm employment which was up 517k vs 190k consensus – a clear underestimation, which would suggest continued strength in the job market and brings the unemployment down to 3.4% (vs 3.6% expected). More than half of the S&P500 companies are yet to report: the next two weeks will be key to assess the extent of the year on year earnings decline for Q4.

Asset classes weekly performance

This week the Dow finished -0.1% lower (+2.4% year to date) while the S&P500 did better with a +1.6% increase (+7.7% year to date, we are 1 time short), the Nasdaq gapped +3.3% higher (+14.7% year to date, we have a 3 times inverse position) and the Russell 2000 gained +3.9% (+12.7% year to date). Gold finished lower -3.2% (+4.0% year to date, we are long) while Silver was -5.1% weaker (-6.7% year to date, we are long). Oil tanked -7.8% (-4.6% year to date). The 10-y US treasury retraced -0.3% this week (-6.9% year to date). The European stock market gained +0.9% (+13.3% year to date). The Euro finished +0.7% higher against the US Dollar (+0.82% year to date).

Weekly pitch

Investors have finally been able to catch a breath after a very positive January. Given the steep climb of these first 5 weeks of 2023, particularly for long-duration tech stocks, one wonders whether the Nasdaq has gone up too quickly. Despite finishing up again this week, the fact that all the four biggest tech companies have disappointed is weakening the bullish sentiment in the Nasdaq, at least in the short term.

It is tempting to go all in when markets outperform but it is prudent to either keep profitable positions on a tight leash (do you use sell stops and take profits like we do?) or have cash and hedges in one’s portfolio (see our portfolio asset allocation below).

Weekly Portfolio Update

Here are this week’s movements: we took profits on Newmont Mining (+13%) and Amazon (+8%); partial sell stops were triggered on our Intel, Mattel, Oak Street Health and Williams-Sonoma short positions. Cash, precious metals and hedges amount to 37% in our portfolio (reduced compared to last week).

Top 5 Weekly Portfolio Performers

Meta +24.4% (Social media/Tech)

Gap +12.12% (Retail trade)

Thor +11.04% (Recreational products)

Orsted +8.18% (Utilities, Green Power)

NXPI +8.05% (Semiconductors)

Portfolio Asset Allocation

US Long stock positions 47% (unchanged)

EU Long stock positions 10% (unchanged)

Short stock position 6.5% (increased)

Hedges 7% (reduced)

Silver & Gold 4% (unchanged)

Cash 26% (reduced)

Year to date Portfolio Performance

Our currency-adjusted year to date portfolio performance in Euro is +4.51% (excl. dividends) vs the European market gain of +12.51% and +5.6% in US Dollars vs the S&P500 gain of 7.7%.

…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 Apple Podcasts and Spotify.

Invest responsibly!!!

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!!!

Why lower highs are bad news | January 21st, 2023 Newsletter

$QQQ $RTX $CPR.MI $SAND.ST $AMZN WSM $CALM $NVDA $KBE $CSCO $DEN $LIT $QCOM $BRK.B $NUE $DIS $THO $MP $KSS $GL $WMT $TGT $GILD $ORI $CNC $SH $GLD $SLV $SON $NEM $HLT $NXPI $DEN $GPS $JPM $CMG $MSFT $META $BWA $LEA $PSQ $SRTY $SQQQ

Weekly summary in a paragraph

The US stock market was a mixed bag, as the Nasdaq rise for the third week in a row was offset by a weaker S&P500 and a tanking Dow Jones. Europe still looks strong, despite this week’s mild decline. The Bank of Japan continues to be unwilling to change its monetary expansion policy. The second week of Q4 earnings only saw a relatively small number of reports, including the surprise beat by $NFLX: next week will be more telling as the large tech stocks report. In other corporate news, $GOOG joined its predecessor tech giants in cutting a significant amount of its workforce. While investors focus on the savings that such companies may benefit from, they often ignore that unemployment leads to less spending, hence revenue contraction.

Asset classes weekly performance

This week the Dow tanked -2.4% (+0.4% YTD) while the S&P500 did better with only a -0.7% retracement (+2.6% YTD, we are 1x short), the Nasdaq finished +0.7% higher (+5.5% YTD, we have a 3x inverse position) and the Russell 2000 lost -0.8% (+4.6% YTD). $Gold finished higher +0.7% (4.5% YTD, we are long) while silver was -0.6% weaker (-2.2% YTD, we are long). $Oil was mildly higher +0.7% (+3.5% YTD). The 20-y advanced +0.3% this week (+4.1% YTD). The European stock market lost -0.5% (+9.0% YTD). The Euro gave up -0.1% against the USD (1.4% YTD).

Weekly pitch

Investors are better equipped when they rely on both valuation and momentum – that’s to say whether a stock is supported by fundamentals and is liked by the market such that it has more buyers than sellers. Many believe that the Nasdaq has bottomed for this cycle: this argument is sustained by the 3-week upside which started at the turn of the year. However, from a technical analysis standpoint, both the S&P500 and the Nasdaq have continued to make lower highs since their respective all time highs in late 2021. Both these indices are yet to see a golden cross form (ie the 50-day moving average cross above the 200-day moving average). Conversely, the Dow and the Stoxx index have experienced both higher highs and a golden cross: in the short term there may be more justification for these indices to move higher thanks to their underlying stocks belonging to the real economy as opposed to the long-duration, tech firms which represent the lion share of the S&P500 and even more so of the Nasdaq.

Weekly Portfolio Update

Here are this week’s movements: we started a long position in $RTX and $CPR.MI; accumulated on $EL.PA and $SAND.ST (which reported a Q4 earnings beat); took profits on $AIG (+19.66%), $USB (+10.96%), $VWS.CO (+5.31), and $GIS (+6.8%); and initiated a sell position on $M, $QQQ and $DFS; while a SL was triggered on our $SI and $LEN short position. Cash, precious metals and hedges amount to 37% in our portfolio (reduced compared to last week).

Top 5 Weekly Portfolio Performers

$GOOG +6.98% (Technology-Internet)

$CPE +6.23% (Oil)

$CSCO +4.30% (Technology, short position)

$DIS +4.10% (Media-Diversified)

$SRTY +3.20% (3x inverse Russell 2000)

Portfolio Asset Allocation

Long stock positions 57% (increased)

Short stock position 6% (reduced)

Hedges 8% (unchanged)

Silver & Gold 4% (unchanged)

Cash 25% (reduced)

YTD Portfolio Performance

Our currency-adjusted YTD portfolio performance in Euro is +2.0% (excl. dividends) vs the European market gain of +6.4% and +3.40% in USD vs the S&P500 gain of 2.9% (a +0.5% market beat).

…in case you missed it…

Check out last week’s newsletter to read the 5 things I got right in 2022…and the 5 I got wrong.

Invest responsibly!!!

Why this earnings season is key to predict 2023 | January 14th, 2023 Newsletter

$AMZN $ACIW $WWE $SLG $WSM $VWS.CO $CALM $NVDA $GIS $KBE $CSCO $DEN $LIT $QCOM $BRK.B $SIG $NUE $DIS $THO $MP $KSS $GL $WMT $TGT $GILD $AIG $ORI $USB $CNC $SH $GLD $SLV $SON $NEM $HLT $NXPI $DEN $GPS $JPM $CMG $MSFT $META $BWA $LEA $PSQ $SRTY $SQQQ

Weekly summary in a paragraph

Second week of upside in a row in this 2023 as last Thursday’s CPI report pleased more the bulls than it did the bears. Despite the disinflation narrative, China re-opening and more resilient than expected European market, the positive sentiment does not seems entirely justifiable.

The first Q4 earnings reports have started to come in, traditionally kicked off by the major US banks, which mostly surprised and finished higher in the Friday session as well as for the week. While the P/E multiple might have contracted as much as it will for this cycle, the fate of earnings is much more uncertain and it is therefore key to closely watch the Q4 earnings results and forecasts for any sign of weakness.

Asset classes weekly performance

This week the Dow gained +2.0% (+3.6% YTD) while the S&P500 did better with a +4.1% jump (+4.4% YTD, we are 1x short), the Nasdaq finished +4.8% higher (+6.6% YTD, we have a 3x inverse position) and the Russell 2000 gapped up +5.3% (+7.6% YTD). $Gold finished higher +2.9% (5.4% YTD, we are long) while silver was +1.8% stronger (+1.5% YTD, we are long). $Oil rebounded +8.5% (1.4% YTD). The 20-y advanced +1.5% this week (+6.8% YTD). The European stock market beat the main US stock market indices and gained +5.2% (+10.8% YTD). The Euro gave up 1.8% against the USD (1.2% YTD).

Weekly pitch

Stocks follow earnings and earnings expectations. If the earnings of a publicly listed company grow, so does its stock price. That is why the bull market which started in March 2009 and lasted 10+ years: in fact the S&P500 average earnings bottomed back then and have grown year on year. The spanner in the works of this more than decade-long favourable trend has been the sudden rise of interest rates, which has contracted the P/E multiple: that is the main reason why the major stock markets around the world entered into bear market territory in 2022. With the FED expected to soon pivot to a more dovish (or less hawkish) monetary policy, all eyes are now on earnings, especially for 2024 because the markets are forward looking: should the earnings continue to grow, a new bull market will be born; else there will be more pain ahead for investors putting their money to work on the long side.

Weekly Portfolio Update

Here are this week’s movements: we started a position in $AMZN and $ACIW, took partial profits on $PSQ (+5.1%), took profits on $BSX.US (+9.41%), reduced our hedge position in $SH (+3.3%), and initiated a sell position on $WWE and $SLG while a SL was triggered on our $SIG short position. Cash, precious metals and hedges amount to 38% in our portfolio (reduced compared to last week).

Top 5 Weekly Portfolio Performers

$CPE +10.61% (Oil)

$THO +10.19% (Consumer durables, recreational products)

$GPS +9.59% (Apparel of footwear retail)

$NUE +9.47% (Steel)

$CMG +8.75% (Restaurants)

Portfolio Asset Allocation

Long stock positions 54% (reduced)

Short stock position 8% (increased)

Hedges 8% (reduced)

Silver & Gold 4% (unchanged)

Cash 26% (increased)

YTD Portfolio Performance

Our currency-adjusted YTD portfolio performance in Euro is +2.43% (excl. dividends) vs the European market gain of +9.6% and +3.63% in USD vs the S&P500 gain of 4.4%.

…in case you missed it…

Check out last week’s newsletter to read the 5 things I got right in 2022…and the 5 I got wrong.

Invest responsibly!!!