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!!!

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!!!