Mechelany Advisors’ MODEL PORTFOLIO has been running in a fully transparent way since January 1st 2014. Its Purpose is to implement the conclusions of our research analytical process in a portfolio managed using institutional liquidity, diversification, risk management and asset allocation processes. In our TRANSACTION UPDATES we keep our reader informed in real time of the transactions in our MODEL PORTFOLIO
Another positive week in global equity markets with global indexes rising by +1.5 to +2.5 % and yet another week of extreme readings in most sentiment and investment indicators.
Our Model Portfolio rose + 1.99 % on the week, matching the world indexes and is now up + 9.37 % in 2021, matching exactly the Year-to date performance of the Nasdaq index.
On a cumulative basis, over the past 7 years and 2 months, our Model Portfolio is up +233 % or a compounded average of +18.56 % per annum, way outperforming all other equity indexes and matched only by the performance of the US Nasdaq.
Weekly Comment
Investors are piling into equities across the board putting record high amounts of money into everything from ETFs to penny stocks to call options and emerging markets.
At the same time, the virus seems to be getting under control, corporate earnings are beating expectations while still remaining rather weak and economic growth is rebounding in most economies starting with China and the UK. France, Germany and some other European countries may nevertheless experience a double dip recession in the first quarter of 2021 due to ill-conceived and too restrictive lockdown policies.
The worrying part of the current equation, besides the extremes in sentiment and bullishness readings is the significant growth in inflation and inflation expectations.
Higher commodity prices, including oil are starting to filter through cost-push inflation indicators while the decision of the Biden administration to almost double minimum wages in the upcoming stimulus plan will ultimately filter in the general indicators of inflation.
Bond vigilantes are now starting to send warning signals. US 10 and 30 year bond yields have had another bad week last week with the 30 year Government bond yielding above 2 % for the first time in months.
This could be a worrying signal for equities together with two other significant developments : the global loss of momentum of the US technology stocks that have globally being going sideways for weeks now while indexes were making new highs – Tesla even broke down below 800 last week – and the peaking of the US Russell 2000 after its spectacular run since March 2020.
Although we do not yet get clear sell signals and the momentum is still upwards, we are in a danger zone where caution is warranted.
Precious metals are rising, oil is nearing our ultimate target of US$ 60 and Chinese indexes made significant breakouts last week.
Weekly activity
We had an active week last week where we added some position in Japan in the US on their own merits and took some profits in some Hong Kong listed stocks while adding index trackers in China as well as a new position in Trip.com, the Chinese online travel giant.
In the US we took some profits on our Biotechnology ETF and re-instated our short positions in Microsoft, Netflix and Apple shares.
We made two very structural moves last week by adding US treasuries for the first time in years to our portfolio and initiating a new short position on the Russell 2000 index .
Asset Allocation
Portfolio Details
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