It's Quiet...Too Quiet...

Estimated read time: 2 minutes and 20 seconds

In this week’s newsletter:

1. Market recap

2. Top holdings: what I am buying & selling

Market Recap

YTD returns:

• S&P 500: +7.02%

• Nasdaq: +16.77%

• Russell 2000: +2.12%

• US Dollar ($UUP): +0.31%

• Gold ($GLD): +8.0%

Quiet week for data with only core PCE and personal spending data:

Core PCE (Personal Consumption Expenditures): measures the changes in the price of goods and services purchased by consumers for the purpose of consumption, excluding food and energy

Core CPI (Consumer Price Index): PCE + food & energy

Despite really only talking about the CPI in these posts, the Fed actually relies heavily on the PCE. Why?

Well...maybe because it's historically a lower number! Closer to their 2% target!

A reminder why I keep talking about inflation in basically every post:

• Inflation remains at historical levels, whether you're looking at PCE or CPI

• When inflation is high, the Fed is incentivized to raise interest rates. This curbs economic activity, which in turn cools inflation. The opposite holds true with low inflation; the Fed could cut rates to bolster economic activity which will cause inflation to rise (think supply & demand curve)

• Interest rates rising is considered negative for the economy as the cost of borrowing (i.e. repayment on debt) increases. Couple this with slowing demand growth and you have companies up against a wall...

  • This is what's happening currently in our economy

  • Tech companies take on a lot of debt in order to promote large-scale growth...understand why I'm bearish on Tech now??

• Anyone want to guess, with high inflation, what the Fed will do next with interest rates?

The Fed Funds Future is pricing in more interest rate hikes in the future. Earnings season is right around the corner.

Rising interest rates and slowing growth? LOL yeah, good luck out there.

But don't worry, our government has us breathing a sigh of relief with inflation "down nearly 30% since the summer"

Yes inflation peaked around 7% and is now at 5%...but that is just blasphemous to describe this as a 30% drop!

If anyone out there passed their basic statistics classes you'll know that taking a percent of a percent isn't exactly an accurate way to portray something...

I see you Biden and raise you 25bps in interest.

In The Account | my top holdings

1. GOLD ($GLD)

   1. The best part about Gold is that it's considered a currency - this means my position sizing can be much larger than single-stock positions in the portfolio. My max position in a currency can go towards 12%, whereas a stock maxes at 6% (volatility adjusted sizing)

2. US DOLLAR ($UUP)

   1. Cooling off, but holding support. Remains a core position in this economic setup.

3. BONDS

   1. While bond volatility remains high ($MOVE), the long end of the yield curve (10Y-30Y) is coming down. This happens when growth slows and is bullish for Bonds.

   2. $EDV, $IIGD, $TLT

On The Radar | positions I want to build / sizing up

1. NOTHING

Off The Grid | removed positions / short selling opportunities

1. TECH - $XLK, $QQQ, $GOOGL, $TSLA, $NFLX

2. RETAIL - $XRT

3. HIGH BETA - $SPHB

4. CRYPTO - $BITO, $MSTR

5. HIGH YIELD - $HYG

6. ENERGY - $XOP

7. BASIC MATERIALS - $XLB

Until next week....

-BW

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.