Is your portfolio protected from liquidity risk? | Responsible Investor Weekly Newsletter, June 17th, 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 your portfolio protected from liquidity risk?”, and was written on June 17th, 2023.

Weekly summary in a paragraph

The US stock market indices finished higher this week, after the Fed opted for a widely expected ‘pause’ which was labelled as “hawkish”. The European stock market was also very strong, though the Euro weakened relative to the US Dollar as the ECB hiked the interest rate by another quarter percentage point. The 2-10y spread continues to widen and has now an inverted value of -93 basis points. In economic data, the May CPI report came in mostly in line. The stock market appeared to ignore the initial jobless claims report which came in weaker than expected. In corporate news, Lennar’s earnings exceeded expectations while Kroger underwhelmed investors. Next week there are a handful of Q1 earnings left, including Fedex, Kb Home and Darden, as well as Accenture’s Q2 earnings report.

Asset classes weekly performance

This week the Dow finished +1.3% higher (+3.5% year to date) while the S&P500 gained +2.6% (+14.9% year to date), the Nasdaq rose +3.3% (+30.8% year to date) and the Russell 2000 gained +0.5% (+6.5% year to date). Gold finished +0.6% higher (+4.1% year to date, we are long) while Silver gained +1.9% (-1.3% year to date). Oil rose +2.9% (-7.2% year to date). The 10-y US treasury yield was -1.8% lower (-0.6% year to date). The European stock market finished +4.1% higher (+20.7% year to date). The Euro lost -1.88% against the US Dollar (-2.3% year to date).

Weekly pitch

The Dow was the third major index to break-out this week, after the S&P500 and the Nasdaq. The macro picture does not support the strong move to the upside seen in recent weeks, however: in fact, the growing divergence between the indices and liquidity is concerning. AI and fear of missing out seems to be fuelling the bulls. When greed is at its peak, 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 Draftkings long position (+31.7%), as well as full profits on our Desktop Metal (+28.7%) and Freeport McMoRan (+10.0%) long positions; a stop loss was triggered on our Coinbase short position as well as on our XPO Logistics short position. We initiated a long position on Zimmet Biomet Holdings and short positions on Tesla, Lennar and UPS. Cash, precious metals and hedges amount to 42% in our portfolio (increased compared to last week).

Top 5 Weekly Portfolio Performers

Plug Power +15.3% (Electronic Tech)

Duerr +10.5% (Industrial Machinery)

Meta +6.1% (Tech)

BorgWarner +6.0% (Construction Machinery)

BUD +5.5% (Alcoholic Beverages)

Portfolio Asset Allocation

US stocks long positions 48.5% (reduced)

EU stocks long positions 9.5% (unchanged)

US stocks short position 3% (unchanged)

Hedges 8.0% (increased)

Silver & Gold 2.5% (unchanged)

Cash 28.5% (increased)

1-year Portfolio Performance

Our portfolio performance over the last 12 months is +15.6% (excl. dividends) vs the S&P500 gain of +20.2%.

Invest responsibly!!!

A new bull market is born…or is it? | Responsible Investor Weekly Newsletter, June 10th, 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 “A new bull market is born…or is it?”, and was written on June 10th, 2023.

Weekly summary in a paragraph

The US stock market indices finished higher this week, with the S&P500 breaking out and officially entering in a bull market by rising 20% off its October 2022 lows, and the VIX hitting pre-pandemic levels. The weakness in the European stock market was offset by the Euro strength relative to the US Dollar. The 2-10y spread continues to widen and has now an inverted value of -84 basis points. In economic data, the US jobless claims jumped to a two-year high. In corporate news, DocuSign earnings exceeded expectations while Nio missed. Notable moves to the upside were observed in Netflix, thanks to the new password crack-down policy, and in Tesla who announced a new gigafactory in Spain. Next week all eyes will be on the May CPI report which will be published on Tuesday and on Wednesday’s FOMC meeting.

Asset classes weekly performance

This week the Dow finished +0.34% higher (+2.2% year to date) while the S&P500 gained +0.4% (+12.0% year to date), the Nasdaq rose +0.14% (+26.7% year to date) and the Russell 2000 jumped +1.9% (+5.9% year to date). Gold finished +0.1% higher (+4.3% year to date, we are long) while Silver gained +3.2% (-0.83% year to date). Oil lost -2.5% (-8.6% year to date). The 10-y US treasury yield was +1.41% higher (-1.27% year to date). The European stock market finished -0.6% lower (+16.0% year to date). The Euro gained 0.37% against the US Dollar (+0.37% year to date).

Weekly pitch

The break-out in the Nasdaq last week was replicated by the S&P500 this week, though the latter is sitting on the 61.8% Fibonacci retracement: some say that a new bull market is born…but is it? The S&P500 is now at the same level as 10 months ago, though most of the uncertainties that existed at the time are still around: anemic earnings growth, full employment, lack of clarity in monetary policy, liquidity drying up and the yet-to-be-resolved Russia-Ukraine conflict. Nobody knows where the markets will go from here. Why did many US politicians take profits on their long stock positions last week? Will the Dow also experience a break-out? Until a broader market participation is 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 Lithium ETF long position (+7.6%), our T-Mobile short-term trade (+4.9%) and our Take-two Interactive short position (+5.7%). We initiated a long position on ASE Technology Holding and short positions on Coinbase and H&R Block. Cash, precious metals and hedges amount to 41% in our portfolio (increased compared to last week).

Top 5 Weekly Portfolio Performers

The Gap +10.5% (Retail)

Desktop Metal +8.9% (Electronic Tech)

Orsted +7.5% (Renewable Energy)

Yelp +5.0% (Tech)

Plug Power +4.6% (Electronic Tech)

Portfolio Asset Allocation

US stocks long positions 49.5% (reduced)

EU stocks long positions 9.5% (unchanged)

US stocks short position 3% (increased)

Hedges 7.5% (unchanged)

Silver & Gold 2.5% (unchanged)

Cash 28% (unchanged)

1-year Portfolio Performance

Our portfolio performance over the last 12 months is +11.0% (excl. dividends) vs the S&P500 gain of +7.0%, which corresponds to a +4.0% market beat.

Invest responsibly!!!

Is this week’s good news enough to sustain the stock markets? | Responsible Investor Weekly Newsletter, June 3rd, 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 this week’s good news enough to sustain the stock markets?”, and was written on June 3rd, 2023.

Weekly summary in a paragraph

The US stock market indices finished higher in this 4-day of trading week, in an environment where good news meant good news again, after the very strong jobs report was published on Friday and the debt ceiling agreement was reached. The European stock market didn’t participate in this rally as the ECB warned the Euro-area banks of liquidity risk should their clients begin withdrawing from their deposits. The 2-10y spread continues to widen and has now an inverted value of -81 basis points. In economic data, the aforementioned non-farm payroll jobs report came in at 339,000 for May topping the 190,000 estimates. In corporate news, Lululemon earnings exceeded expectations while Dollar General missed. In the tech sector Salesforce beat and raised guidance while cybersecurity darling Crowdstrike warned of slowing revenue growth. While most S&P500 companies have now reported Q1 2023 earnings, there are still a few to watch next week including Stitch Fix, DocuSign and Nio.

Asset classes weekly performance

This week the Dow finished +1.9% higher (+1.9% year to date) while the S&P500 gained +1.8% (+11.5% year to date), the Nasdaq rose +0.9% (+26.5% year to date) and the Russell 2000 jumped +2.6% (+4.0% year to date). Gold finished -0.3% lower (+3.7% year to date, we are long) while Silver gained +2.1% (-3.7% year to date). Oil gained +3.0% (-6.7% year to date). The 10-y US treasury yield was -0.24% softer (-2.69% year to date). The European stock market finished -0.3% lower (+16.6% year to date). The Euro lost -0.2% against the US Dollar (flat year to date).

Weekly pitch

With the long-awaited and somewhat expected resolution of the US debt ceiling now behind, the stock market can go back to concentrating on its more tangible drivers. All eyes are now on the next Fed meeting in mid-June at which the markets are expecting a pause of interest rate hikes. The focus will then turn to Q2 earnings season which will kick off in just one month’s time. It will be important to watch the Dow which is the laggard of the main US indices, while the Nasdaq broke out this week and the S&P500 is very close to replicating that move. Until a broader market participation is 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 Range Resources long position (+5.3%), and full profits on our Weight Watchers (+11.8%) and Johnson & Johnson’s (+7.3%) short positions. We initiated a long position on T-Mobile and Budweiser, and accumulated on our Hong Kong ETF. Cash, precious metals and hedges amount to 40% in our portfolio (reduced compared to last week).

Top 5 Weekly Portfolio Performers

Desktop Metal +16% (Electronic Tech)

Freeport McMoRan +7% (Non Energy Minerals)

Plug Power +6.3% (Electronic Tech)

Centene +6.0% (Managed Healthcare)

Halliburton +4.8% (Oilfield Services)

Portfolio Asset Allocation

US stocks long positions 50.5% (increased)

EU stocks long positions 9.5% (unchanged)

US stocks short position 2% (reduced)

Hedges 7.5% (unchanged)

Silver & Gold 2.5% (unchanged)

Cash 28% (unchanged)

1-year Portfolio Performance

Our portfolio performance over the last 12 months is +7.9% (excl. dividends) vs the S&P500 gain of +2.5%, which corresponds to a +5.4% market beat.

Invest responsibly!!!

Is there an AI bubble in the stock market? | Responsible Investor Weekly Newsletter, May 27th, 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 there an AI bubble in the stock market?”, and was written on May 27th, 2023.

Weekly summary in a paragraph

The US stock market indices finished mixed this week, with the Nasdaq jumping 2.5% supported by Nvidia’s blow-out earnings report. The European stock market tanked on Germany entering into a technical recession after two consecutive quarters with a negative GDP. The 2-10y spread widened and has now an inverted value of -74 basis points. It was a slow week for economic data. In corporate news, Nvidia’s earnings exceeded expectations by a large margin as did their guidance. In the department store sector Target disappointed while Low’s beat expectations. While most S&P500 companies have now reported Q1 2023 earnings, there are still a few to watch next week including Broadcom, Crowdstrike, Salesforce and Five Below.

Asset classes weekly performance

This week the Dow finished -1.0% lower (-0.2% year to date) while the S&P500 gained +0.32% (+9.5% year to date), the Nasdaq jumped +2.5% (+24.0% year to date) and the Russell 2000 finished flat (+0.7% year to date). Gold finished -1.5% lower (+3.8% year to date, we are long) while Silver lost -1.7% (-4.7% year to date). Oil gained +1.1% (-5.4% year to date). The 10-y US treasury yield rose sharply by +2.45% (+0.45% year to date). The European stock market finished -1.8% lower (+17.2% year to date). The Euro lost -0.9% against the US Dollar (+0.2% year to date).

Weekly pitch

While no political agreement has been reached on the US debt ceiling this week, the chances of this crisis being resolved this week are high. Last week we warned on the risk the stock market faces is the drying up of liquidity as one trillion USD worth of bonds will have to be issued. The Nasdaq has suffered from the rise in interest rates in 2022 and lost 33%: the prospect of a pause and subsequent reduction in rate hikes has pushed it higher in the first quarter of 2023 and the recent AI frenzy has only exacerbated this move. Tech is the sector most at risk by a contraction in liquidity and might bring the Nasdaq rally to a screeching halt. 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 Fielmann (+11.9%), Zoom (+8.9%) and Fortinet (+3%) long position and partial profits on our Gold ETF (+10.4%) long position; a partial sell stop was triggered on our New Relic long position. We initiated a long position on Desktop Metal, a potential buyout target. Cash, precious metals and hedges amount to 41% in our portfolio (unchanged compared to last week).

Top 5 Weekly Portfolio Performers

Plug Power +8.4% (Electronic Tech)

The Gap +7.2% (Retail)

ProShares UltraPro Short Dow30 +6.3% (3x inverse the Dow)

MP Materials +4.5% (Non energy minerals)

iPath Series B S&P 500 Vix Short-Term Futures ETN +3.6% (Volatility ETN)

Portfolio Asset Allocation

US Long stock positions 49.5% (unchanged)

EU Long stock positions 9.5% (unchanged)

US Short stock position 3% (reduced)

Hedges 7.5% (unchanged)

Silver & Gold 2.5% (reduced)

Cash 28% (increased)

1-year Portfolio Performance

Our portfolio performance over the last 12 months is +5.9% (excl. dividends) vs the S&P500 gain of +1.1%, which corresponds to a +4.8% market beat.

Invest responsibly!!!