This short week was reasonably quiet in markets, with perhaps the most notable action being a pure steepening in the rates curve. Equity markets drifted lower as bank earnings were generally underwhelming, and oil rose as hostilities in Ukraine seem set to ramp back up. For those keeping track, apparently Ukraine didn't attack the Moskva, but did attack the village of Klimovo.
The increased tension in Ukraine may have prevented the ECB from acting aggressively to contain inflation. This divergence with the Fed is likely to maintain the recent trend of Dollar strength.
The pure steepening in rates markets is likely to have been a result of profit taking in flattener positions. Our bond portfolio was instead positioned for profit taking in short duration position, and as a result suffered a 20bps loss. However, the decline in equities gave our 60/40 portfolio a 20bps gain, bringing it back approximately in line with its benchmark.
The sector portfolio had a quiet week as oil stocks continued to drift higher. XLE still appears to be tracing out an ending diagonal triangle, and so we still assign a high likelihood that a fall to around 70 is coming soon.
The rise in oil may also have been due to strong demand reported by DAL. This benefitted our position in AAL and we took profit today. A further extension to the mask mandate skews the risks to the downside in our opinion.
We also took profit on a new position in RBLX entered on Monday looking for a quick short squeeze. The main reason we got to take profit was a good entry level on Monday, for which we feel obliged to provide proof. (Broker screenshot below.)
Finally we note that GS outperformed today as strong commodity trading results helped it to outperform its peers.
This was exactly our thesis when we put on our GS/XLF trade, although this only brings us back to approximately flat, so unless this outperformance persists next week we are likely to exit this trade.
Benchmarked portfolios
Our sector portfolio, benchmarked to SPY, was down 5bps on selling XLE.
Our 60/40 portfolio gained 20bps from an equity underweight and bond overweight.
Our bond portfolio, benchmarked to AGG, lost 20bps, on a long duration portfolio.
Benchmark | Current Active Portfolio | Current week | YTD vs Benchmark | Annualized since inception | IR since inception |
SPY | -4% XLE | -5bps | 154bps | 385bps | 2.1 |
60% ACWI, 40% AGG | -15% ACWI, 10% AGG, 5% Cash | 20bps | -3bps | -10bps | -0.1 |
AGG | -12% AGG, 3% EMB, 9% TLT | -20bps | 27bps | 525bps | 6.7* |
An archive of our prior weeks is available here.
* Our Bond portfolio has only 4 weeks of history
David's trades:
In David's medium-term portfolio (The Money Game) we made no changes.
Portfolio | Ticker | Date entered | Entry | Last close | Size |
Medium term | ERUS | 33 | 8.06 | 50% | |
Medium term | SPXU | 15.85 | 14.58 | 100% | |
Medium term | IEF | 106.76 | 103.44 | 33% |
Closed trades year-to-date = 7
Closed trades that made money = 3
Closed trades that lost money = 3
Closed trades that broke even = 1
An archive of our closed trades is available here.
John's trades
In John's short term portfolio (More Buyers or Sellers) we bought RBLX shortly after the open on Monday. We sold that RBLX position and also AAL at the open on Thursday.
Portfolio | Ticker | Date entered | Entry | Last close | Size |
Short term | NNDM | 4.62 (avg) | 3.06 | 100% |
Closed trades year-to-date = 16
Closed trades that made money = 7
Closed trades that lost money = 8
Closed trades that broke even = 1
An archive of our closed trades is available here.
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