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!!!