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Happy Monday Tuesday and the week ahead! Welcome to this 31st post of investing, not rocket science! Investing Doesn't Have to Be Rocket Science: this is our Non-Expert Guide to Portfolio Management.
We begin this post with an update of the Financial Markets and Economic data released last week
According to economic projections released last week, EU GDP growth is revised up to 1.0% in 2023 (from 0.8%) and 1.7% in 2024 (from 1.6%). Inflation surprised to the upside, and it is now expected at 5.8% in 2023 and 2.8% in 2024 in the euro area, respectively 0.2% and 0.3% higher than in winter. Snapshot of the EU economic projections:
North America Economic Data:
US retail sales increases 0.4% MoM in Apr’23, from -0.7% in Mar.
U.K and Europe Economic Data:
UK unemployment rate in March at 3.9% compared to 3.8% in Feb’23 Eurozone CPI at 7% YoY in Apr’23 lower than 6.9% in Mar, Core CPI at 5.6% YoY lower than 5.7% in Mar.
Asia Economic Data:
Chinese Industrial Production for April’23 rises to 5.6% YoY, the third consecutive rise this year.
Japanese GDP (Q1) increases 0.4% QoQ, above expectations of a 0.1% increase.
Economic Data This Week:
FOMC Minutes of the meeting
Manufacturing PMI in the US, UK, EU.
UK CPI for Apr’23
UK Retail Sales data
Financial Markets:
Major equity indices posted gains this week. The S&P 500 also hit a new closing high for the year on Thursday (4,199) and a new intraday high for the year on Friday (4,212). Index performance was mainly driven by mega caps. The Vanguard Mega Cap Growth ETF (MGK) rose 2.9% and the Invesco S&P 500 Equal Weight ETF (RSP) was up 1.0%. Optimism around the US debt ceiling limit discussion also helped.
Dallas Fed President Logan (FOMC voter) said that current data doesn't yet support the Fed pausing in June. St. Louis Fed President Bullard (not an FOMC voter) acknowledged the need to raise rates further since inflation remains persistently high.
Bond Yields rose as participants priced in a possible rate increase in the June.
A quick recap of this blog series (investing, not rocket science) so far:
In the 1st post: I defined a basic portfolio framework. The objective of this million dollar portfolio is beat inflation and an equity index. The investment style presented here is active portfolio management, without the use of leverage and a time horizon greater than 5 years. The benchmark index is the MSCI ACWI Investible Market Index. Typically, there are two posts a week, which includes details of the portfolio and actionable evaluations (Mondays and Fridays).
From posts 2 to 20, 28-30: I have evaluated 71 stocks and 4 potential bond additions. The portfolio is long 15 stocks, 1 Bond and short 1 stock.
Posts 21 to 27 were focused on the Q1 2023 earnings announcements, particularly of stocks in the portfolio and in the watch-list. You can read all about it in the previous posts here: https://www.claritech.app/blog
You can click on the charts, graphs or illustrations to expand or zoom in. There is no remuneration received to evaluate specific companies or to add to the portfolio or the watch-list. The Amazon adverts you see are the source of revenue for this free blog (subject to purchases or subscriptions).
Portfolio review:
1. Since inception of this series (14th Feb 2023), the portfolio is Up +0.68%, while the benchmark is up +1.47%. The annualized return on the portfolio is 2.6%.
2. Risk measures: The portfolio has a Sharpe Ratio of -0.15, Sortino of -0.19 and a Standard Deviation of 0.50%.
3. The biggest gainers on the portfolio are Alphabet (+39%), Tesla (19%), BMW (+14%), Glencore (+11%), and ICBC (+8%).
4. Among the long positions, Deutsche Bank (-12%) continues to remain the largest detractor, followed by Citigroup (-8%). Rise in the stock price of Nvidia, a short position (used as a hedge to equity exposure – read about it in post 14 here), contributed to a downward pull in portfolio performance. Nvdia is up 11% from the average selling price.
5. Asset Class: Fixed Income, Real Estate and Cash have contributed to the positive performance of the portfolio. While the long positions are up 3%, including the hedge, Equities are in the red.
In summary, since inception the portfolio has begun to under perform the benchmark since last week, largely due to the strategy in equities.
Allocation:
1. Regional allocation: Europe 39%, North America 52% and Asia 9%
2. Asset Class allocation: Equities (33%), Fixed Income (23%), Real Estate (4%) and Cash (40%)
3. See illustrations below for Portfolio Holdings and Allocation.
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This series is for information purposes only without regard to any particular investment objective, financial situation, suitability or means. It is not be construed as a recommendation, or any other type of encouragement to act, invest or divest in a particular manner (whether explicit or implicit). We recommend that you are familiar with the terms of use.
That’s all for today, thank you for your time! See you in the next post!
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