Not Your Friend … (TWTW – June 6-10, 2022)

Not Your Friend …

We’ve all heard it at some point in our career, or journey in the world of investing – “don’t fight the trend”, or better yet: “the trend is your friend”. Of course there is also that other one … Don’t fight the FED … but that one is another one for another day 🙂

For any of us thus far in 2022, IF, by chance we’re tempted to Let ourselves be lulled in trying to find comfort in that saying  … I guess the first thing to do would be to ask ourselves: “and how has that been working out”?

Think back to last summer and then fall, how have you been positioned, respectively if you have since pivoted, how has all of this been playing out in terms of resulting portfolio performance to-date, respectively positioning going forward.

FACT – we’ve undergone a massive shock to the system overall, and the nature of the “game” as it stands may as a result have shifted in significant ways many likely still have to adjust to.

The “lens” through which we view all of this is important as well, as it dictates how we are able to adjust, or make sense of an environment many of us may be ill equipped to perhaps “appreciate”.

Bottom line for me – until proven differently, we are in the midst of massive disruption and changes. UNTIL all of this settles down, no matter how much we’ve already come off from the top, we remain at risk of further downside. I realize everyone is always encouraged to stay the course, focus on their long term objectives and not to be reactive. ALL of that is all well and good, and very often indeed the right advice. UNFORTUNATELY – I fear that this may fail to allow for the game changing nature of some of the developments unfolding, as well as be a stand pat answer that doesn’t acknowledge that individuals are very different in their ability to stomach churning market events. In other words, my personal take would be: UNDERSTAND we are now dealing with a possibly VERY DIFFERENT animal overall (the market) and appreciate that this may require some adjustments in your approach and portfolios. BUT HEY, that’s me … a lot of people will just do … NOTHING … which is fine, EXCEPT IF you could see or think of useful relevant changes to be made, YET didn’t act.

The “trend” at the moment, I am afraid to say … doesn’t look to be your friend for some time …

Recent developments:

  • JPM’s Jamie Dimon speaking about fortifying JPM’s balance sheet as he expects a “tornado” to be underway
  • Tesla’s Elon Musk – MEMO to the troops: 10% of yous are fired … cos I worry about the economic outlook …
  • Microsoft – recently warning on revenues and profits on account of the strong USD
  • Docusign – stock off 25% or so Friday, on disappointing results. MR Beautiful by the way (is that what Kevin O’Leary is described … I forget …) buying more of the stock as he doesn’t see Docusign disappearing any time soon
  • Oil – we’re sitting around USD120, with the world seemingly recognizing … gradually … that we’ve got a supply problem
  • World Bank (was it) just warned of risk of “stagflation”
  • BoC – warned that stretched consumers are a threat to the outlook for the Canadian economy, indicating that rates will continue on higher, and through their recent 3% target
  • Inflation – came in at 8.6%, beating expectation – not good aka … that whole “transitory” business … well, that isn’t playing out very well at the moment…
  • Politics in Canada – thanks Liberals and NDP for jacking up gas taxes recently and refusing any pause on that front, thereby showing clearly to Canadians how much neither of you Mr. Trudeau and Mr Singh, give a damn about how any Canadian is struggling with rising costs of everything an anything. Thanks for … NOTHING!

Have a great week-end 🙂

Weekly Performance: Sectors; Thematic; Factors: Regions:

  • Not exactly a great week … across the board. Capitulation coming up next?
  • Energy – the only standout …
  • Real Estate … quite the downtick this past week … Fears of Recession rising?

  • Significant downdraft in Travel: a look past pent up demand being dealt with this summer/fall and into recession?
  • Lone themes holding up reasonably well last week: Clean Energy; Cyber security (= most solid themes?)

  • Min Vol continuing to show decent “relative” performance … which … overtime not to underestimate, in that the climbing back is easier if some of the downside has been mitigated …

  • China the lone “gainer”, helping relative performance of EM
  • Japan – continuing to show relative strength … (a safe harbour if you are looking for some international diversification?)

 

YTD Performance : Sectors; Thematic; Factors; Regions:

  • Astounding relative performance? Energy …
  • Notable: Financials struggling alongside broader market of late = rising fears of recession …
  • Defensives: doing their “thing” still: Staples and Utes …

  • Themes are pretty much all in a brutal / ruthless bear market aka on sale. Bottom line: opportunities to play around with themes, in terms of relative appeal, etc, but with care, as volatility in that arena meaningfully greater than elsewhere (and it isn’t as if elsewhere … everything isn’t already fairly volatile …)

  • Friends? Until and Unless the relative performance of Min Vol; Fundamental; Value and Dividend shows signs it is set to unwind … I’d stick to these as relative “safe havens” at the moment …

  • Who knew … Japan and Canada: standouts in an otherwise “troubled” world of investing …