Tag: rate hike

IS THE SANTA RALLY ONE WEEK LATE ? | December 24th, 2022 | $NVDA $GIS $SRTY $KBE $CSCO $DEN $LIT $QCOM $BRK.B $SIG $NUE $PLUG $TELL $DIS $THO $MP $KSS $GL $WMT $TGT $GILD $AIG $ORI $USB $CNC $SH $GLD $SLV $SON $NEM $HLT $NXPI $DEN $GPS $JPM $CMG $MSFT

Weekly summary in a paragraph

Mixed results in the US stock market this week: while the Dow finished higher, the S&P500 was mildly lower whereas the Nasdaq closed markedly down and is in the red for the third straight week. Good performance for precious metals and related stocks. The jobs report indicated resilience in the US labour market and the inflation data points were either in line with expectations or mildly hotter.

The Bank of Japan shocked the world with its decision to end its long-standing money printing policy. Oil showed its strength after Russia declared that production could be cut to counteract the price cap decision by the EU. All of this while the largest ever US equities outflow was recorded.

Meanwhile in China there are reports of record 34M Covid infections in a single day as well as growing concerns for headwinds due to the virus surge. Can a belated Santa Rally in the last trading week of 2022 relieve the pain of a so far rather negative month of December?

Asset classes weekly performance

This week the Dow gained +0.9% (-9.11% YTD) while the S&P500 fell -0.2% (-19.33% YTD, we are 1x short), the Nasdaq retraced -1.9% (-33.04% YTD, we have a 3x inverse position) and the Russell 2000 finished flat (-21.96% YTD, we are 1x short). $Gold finished marginally higher +0.3% (-2.46% YTD) and silver gained +2.2% (+0.84% YTD). $Oil showed its strength with a +7.2% gain and is now back in positive territory for this year (3.03% YTD). The 20-y lost -4.6% this week (-30.04% YTD). The European stock finished +0.3% higher (-16.80% YTD). The Euro recovered +0.3% over the USD (-6.31% YTD).

Weekly pitch

This week’s market behaviour should serve as a reminder that nobody knows what happens next, even when estimates or predictions are met. Investors should follow a risk-based approach and hedge. Simply put, hedging means investing on the opposite side of your main portfolio, though for a smaller proportion, in order to limit losses if the market turns against you. While this reduces your profits when you have the wind in your back, it does offer a parachute when the opposite occurs. Many of those who are beating the market in 2022, like us (see below), have hedged and are either in the black or simply less in the red. The Santa Rally may well just be one week late but why risk and not hedge?

Weekly Portfolio Update

Here are this week’s movements: we took profits on $GILD (+35% gain) and partial profits on our short position in $SIG (+10.88%); we started short positions on $NVDA and $GIS. Stop loss was triggered on $TELL. Cash, precious metals, hedges and short stock positions amount to 44% in our portfolio (increased compared to last week).

Top 5 Weekly Portfolio Performers

$CHTR +9.50% (Communications)

$NVDA +8.24% (Semiconductors, short position)

$SQQQ +6.49% (3x inverse Nasdaq)

$SBSW +6.16% (Precious metals)

$NEM +3.71% (Precious metals)

Portfolio Asset Allocation

Long stock positions 56% (reduced)

Short stock position 3% (unchanged)

Hedges 9% (unchanged)

Silver & Gold 4% (unchanged)

Cash 28% (increased)

YTD Portfolio Performance

Our currency-adjusted YTD portfolio performance is -9.17% (excl. dividends) vs the European market loss of -10.43% (+1.3% European market beat, expressed in €) and the S&P500 loss of -19.33% (+3.9% US market beat, expressed in $).

Invest responsibly!!!

THE POWER OF HEDGING: WHAT IT IS AND WHY YOU NEED IT | December 17th, 2022 | $KBE $CSCO $DEN $LIT $QCOM $BRK.B $SIG $TSM $NUE $HZNP $AMGN $PLUG $TELL $DIS $THO $MP $KSS $GL $WMT $TGT $GILD $AIG $ORI $USB $CNC $SH $GLD $SLV $SON $NEM $HLT $NXPI $DEN $GPS $JPM $CMG $MSFT

Weekly summary in a paragraph

Second week of decline for global stock markets as cooler inflation data published in the US was not enough to offset the impact of hawkish central banks. While the rate hikes confirmed by the FED and the ECB were in line with estimates, in the press conference Jay Powell kept pushing back against pivoting.

Meanwhile in China reports of more infections, increasing deaths as well as political speculation about propping the housing sector dominated the news cycle and resulted in further weakness.

The pressure is mounting on earnings estimates as the risk of further downside is materialising and spreading amongst analysts. Perhaps the only playable narrative for the bulls is the expected seasonal tailwind (aka the “Santa rally”).

Asset classes weekly performance

This week the Dow lost -1.7% (-8.63% YTD) while the S&P500 fell -2.1% (-19.17% YTD, we are 1x short), the Nasdaq retraced -2.8% (-30.90% YTD, we have a 3x inverse position) and the Russell 2000 gave up -2.4% (-21.03% YTD, we are 1x short). $Gold finished marginally lower -0.2% (-3.28% YTD) and silver lost -0.8% (-1.26% YTD). $Oil showed its strength with a +4.0% gain and is now back in positive territory for this year (+1.20% YTD). The 20-y gained +0.8% this week (-26.90% YTD). The European stock finished -2.3% lower (-16.16% YTD). The Euro recovered +0.6% over the USD (-5.73% YTD).

Weekly pitch

This week’s market behaviour should serve as a reminder that nobody knows what happens next, even when estimates or predictions are met. Investors should follow a risk-based approach and hedge. Simply put, hedging means investing on the opposite side of your main portfolio, though for a smaller proportion, in order to limit losses if the market turns against you. While this reduces your profits when you have the wind in your back, it does offer a parachute when the opposite occurs. Many of those who are beating the market in 2022, like us (see below), have hedged and are either in the black or simply less in the red.

Weekly Portfolio Update

Here are this week’s movements: we benefitted from $HZNP being bought out by $AMGN (+14% average gain); we started a short position on $CSCO as well as long positions on $LIT, $KBE, $QCOM and $BRK.B; we sold our short position on $TSM, perhaps prematurely. Cash, precious metals, hedges and short stock positions amount to 40% in our portfolio (reduced compared to last week).

Top 5 Weekly Portfolio Performers

$HZNP +16.02% (Pharma)

$TELL +13.08% (Oil)

$SQQQ +8.07% (3x inverse Nasdaq)

$DEN +6.70% (Oil)

$PLUG +4.94% (Alternative Energy-Fuel Cell)

Portfolio Asset Allocation

– Long stock positions 60% (increased)

– Short stock position 3% (increased)

– Hedges 7%, though equal to 9% considering leveraged ETFs (reduced)

– Silver & Gold 4% (unchanged)

– Cash 26% (reduced)

YTD Portfolio Performance

Our currency-adjusted YTD portfolio performance is -8.97% (excl. dividends) vs the European market loss of -10.43% (+1.5% European market beat, expressed in €) and the S&P500 loss of -19.2% (+4.5% US market beat, expressed in $).

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!!!