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!!!

$NEM $LVMUY $LRLCY $BK $SYF $GILD $GRUB $SQQQ $SCO $PCG | Responsible Investor Portfolio Update, June 27th, 2020

This week was a roller-coaster for the global markets which pushed higher in the first two trading days to then loose strength and finish the week down. We still did not manage to have two consecutive negative days though !

In the US markets the #Dow suffered a 3.3% loss, followed by the #S&P500 which closed 2.9% lower than last week and the #Nasdaq which limited the loss to 1.9%. The weekly performance in Europe was no different, however all the three indices we follow more closely fared better than the US markets (#Stoxx -1.1%, #OMXC20 -1.3% and #FTSEMIB -1.6%).

Our RI Portfolio was nominally positive this week (+0,2%) and therefore outperformed these 6 indices by a weighted average of +2.6% thanks to selected stocks and especially to the hedges I had put in place during the preceding week, namely $SQQQ and $SCO.

We now have one full month of track record and I am pleased to see that we are showing a positive total return of 1.4% (+0,4% vs the Market).

There was only one Buy Alert this week, for precious metals stock #Newmont which benefited from the stock markets coming to a screeching halt. We also added to the triple inverse Nasdaq ETF $SQQQ position which proved to be the right move. With reduce and accumulate alerts the relative weight of the open positions change of course.

This week’s winners in our RI Portfolio were $SQQQ (+7,4% gain) and, once again, Grubhub (+8,1% gain).

No relative changes between the three currencies of the RI Portfolio.

We now have 15 open positions, 2 of which are leveraged hedges (inverse ETFs). Even in times of high valuations I keep finding cheap stocks and a possible further drop of the markets next week, especially around the quarter close, may offer an opportunity to initiate new positions.

The table below summarises the portfolio performance since inception.

If you don’t want to miss my alerts, please subscribe to Responsible Investor or follow me on Twitter. I also run an eToro portfolio which currently has 30 positions and can be accessed via this link.

$LVMUY $LRLCY $BK $SYF $GILD $GRUB $SQQQ $SCO $PCG | Responsible Investor Portfolio Update, June 20th, 2020

The global markets were consistently positive this past week, with Italy’s #FTSEMIB leading with a 3.9% gain. Our RI Portfolio lagged behind due to the hedges I had put in place. I had increased our hedges as I felt the markets were “tired” of going up but the week was largely positive in the end. Well, we are still showing a positive total return and we are only 3 weeks in since inception ! Also, I’d rather always loose on my hedges than on my core positions..

We have initiated 4 new positions this week, all in the European markets: two consumer French large caps, Luis Vuitton and L’Oreal and two Italian stocks, one in the media sector and the other one in the technology sector. We have also accumulated on Pacific Gas and Electric Company. With reduce and accumulate alerts the relative weight of the open positions change of course.

This week’s winners in our RI Portfolio were Italy-based Terna (+8,4% gain) and Grubhub (+6,2% gain).

The USD lost some ground compared to the EUR (0.9%) while there was no impact of the Danish krona. This means that in a portfolio in USD, the European stocks will have lost some of their value.

We now have 14 open positions, 2 of which are leveraged hedges (inverse ETFs). We are almost half way through along the path to achieve a complete portfolio. The table below summarises the portfolio performance since inception and now includes the investment strategy for each position.

If you don’t want to miss my alerts, please subscribe to Responsible Investor or follow me on Twitter. I also run an eToro portfolio which has 20+ positions and can be accessed via this link.

$BK $SYF $GILD $GRUB $SQQQ $SCO $PCG | Responsible Investor Portfolio Update, June 13th, 2020

Two weeks in, the Responsible Investor Portfolio is up 2.5% while the markets are only up 0.6%: that’s a +1.9% outperformance. As the RI Portfolio has stocks traded over multiple markets, the market performance is calculated as a weighted average.

This past week was particularly volatile and saw a sharp decline in the stock markets on Thursday 11th of June: that day the RI Portfolio was actually up, you can read the details in a previous post. This week’s outperformance is particularly significant as the markets were down 4.9% while our portfolio only lost 0.4% (+4.4.%).

We have made 3 trades this week: we sold CELL.MI for a 7.8% profit and bought $GRUB following rumours about a takeover from JustEat after Uber’s bid hit the wall. So far Grubhub is up 6.9%. The other trade is a hedge on oil.

The relevant currencies (USD, EUR and DKK) were neutral and therefore had no impact on the portfolio.

We now have 10 open positions, 2 of which we intend to keep on a short leash as they are leveraged hedges. There is still a long way to go to achieve a complete portfolio which requires several additional positions as well as a greater diversification across the various sectors.

If you don’t want to miss my alerts, please subscribe to Responsible Investor or follow me on Twitter. I also run an eToro portfolio, which can be accessed via this link.

Four more winners, $TWTR and..

In a mixed week for the US stock market, ended on April 24th, we have made four more successful trades:

$TWTR +4.1%

$SYF +3.5%

$VLO +2.0%

$LH +2%

For some of these companies, under normal market conditions, I would continue to hold, rather than sell to lock in a small profit, however these are no normal conditions ! There is so much complacency right now and the market seem to price in not only the Fed interventions but the possibility that, if things get worse, the buying could extend to securities also.

Having said that I remain only 50% invested in my eToro portfolio so that a sudden market drop would not hurt as much and would give me enough fuel to enter more long positions after it stabilises again.

We have also initiated the following long positions last week:

$SQQQ this is a hedge for the reasons above

$PTON this is to attempt a ride on a popular stock

..plus another one which you are welcome to check out in my eToro portfolio.

The earnings season is in full swing: enjoy and invest responsibly !