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!!!

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!!!

Is disinflation a precursor of a recession? | Responsible Investor Weekly Newsletter, April 15th, 2023

$WWE $DXCM $HAL $EA $SDOW $SNAP $ADBE $FIVE $ACIW $XLV $AAPL $SNY $GOOG $QQQ $RTX $CPR.MI $SAND.ST $AMZN $WSM $NVDA $DEN $LIT $QCOM $BRK.B $NUE $DIS $MP $GL $WMT $TGT $GILD $CNC $SH $GLD $SLV $SON $NEM $HLT $NXPI $DEN $GPS $JPM $CMG $MSFT $META $BWA $LEA $PSQ $SRTY $SQQQ

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 disinflation a precursor of a recession?”, and was written on April 15th, 2023.

Weekly summary in a paragraph

The US stock market indices finished higher for the week, despite a sell-off on Friday. The main catalyst consisted in the declining PPI data published on Thursday, just a day after the CPI report came in cooler-than-expected. The European stock market continued to show its strength and so did the Euro. The 2-10y spread finished flat and is still inverted at -56 basis points. In corporate news, Tesla announced a series of price cuts in the US and three of the major US banks (JP Morgan, Citigroup and Wells Fargo) were the first to report a Q1 2023 earnings beat this week, with JP Morgan results being the most impressive. The earnings season kicks off in earnest next week: any significant misses may exert pressure on the market.

Asset classes weekly performance

This week the Dow finished +1.2% higher (+2.2% year to date) while the S&P500 gained+0.7% (+7.7% year to date), the Nasdaq rose +0.3% (+15.8% year to date) and the Russell 2000 advanced +1.5% (+1.1% year to date). Gold finished +0.7% higher (+7.5% year to date, we are long) while Silver gained +2.2% (+4.3% year to date, we are long). Oil was +3.7% higher (+6.9% year to date). The 10-y US treasury yield gained +3.1% (-7.1% year to date). The European stock market rose +0.7% (+16.8% year to date). The Euro finished +0.76% higher against the US Dollar (+2.7% year to date).

Weekly pitch

The economic data published this week supports the disinflation narrative and leaves the Fed in the challenging position of timing the pivot correctly, if that’s at all possible: not too early to avoid inflation picking up again, and not too late to risk sending the economy into a deep recession. While a recession in late 2023 or early 2024 seems to be in the cards, the real question is how severe it may be and how long it may last. Thankfully not everything is in the hands of the monetary policy makers: the Q1 2023 earnings and especially the future earnings forecasts will provide an objective read of the state of publicly traded companies. Ultimately, it is the growth in earnings that has pushed the markets higher over the decades. Responsible investors should keep an eye on their positions during the earnings seasons, and adjust their portfolio depending on how the companies they have invested in guide for future quarters. This week we have beaten the market again and have deployed some cash.

Weekly Portfolio Update

Here are this week’s movements: we took partial profits on our Newmont Mining long position (+7.4%) and exited our Coinbase short position with a nominal gain; a sell stop was triggered on our Dexcom short position. Cash, precious metals and hedges amount to 39% in our portfolio (reduced compared to last week).

Top 5 Weekly Portfolio Performers

Palantir +8.90% (Tech)

JP Morgan +8.83% (Banking)

Callon Petroleum +7.57% (Oil)

Freeport McMoRan +7.12% (Non-energy minerals)

BorgWarner +5.80% (Automotive)

Portfolio Asset Allocation

US Long stock positions 52% (increased)

EU Long stock positions 9% (unchanged)

US Short stock position 4.5% (increased)

Hedges 7.5% (unchanged)

Silver & Gold 5% (unchanged)

Cash 22% (reduced)

1-year Portfolio Performance

Our portfolio performance over the last 12 months is +0.1% (excl. dividends) vs the S&P500 loss of -5.8%, which corresponds to a +5.9% market beat.

Invest responsibly!!!