How we achieved a 3% return in August (without stressing over Nvidia Earnings)

Investing alongside the former managing director of Goldman Sachs, I am often reminded that investing is all about generating returns while protecting clients' capital.

While the key to protection is diversification, based on people’s obsession with Nvidia’s earnings, most don’t have enough. I would never want to be in a position where the earnings of a single company can make such an impact on my portfolio.

 Many people think that if they buy the whole market (S&P 500), they are well diversified. This is no longer the case, as Nvidia makes up more than 6% of the S&P 500.

You need to implement a global allocation like we do at The Minimalist Portfolio to have real diversification. As we continuously demonstrate this doesn’t only increase your safety but also your upside as we outperformed the S&P 500 yet again in August.

Let me provide a quick macro summary to paint the picture of the current macro environment before we head into how to position ourselves for the future with our key portfolio positions.

Current Market Summary

Growth:
·      We’re seeing high deficits and debt levels, likely to increase as the push for economic stimulation continues.
·      The labor market is still resilient, with job losses low, but a slowdown in hiring suggests we’re in the late stages of the economic cycle.
·      Meanwhile, large corporations are thriving with solid profits, yet consumers are increasingly burdened by debt, highlighting a growing economic divide.

The focus should be on inflation, as we are currently slowing, but this will change quite soon. We have leading data showing that reacceleration is to be expected at the same time the Fed is set to lower rates. These two dynamics will work together to provide an environment where inflationary plays as commodities work great!
 
However, this is not an optimal place to be before the end of September, so let’s look into what we can buy right now!

Going Forward

As you (should) know by now, we build a portfolio out of countries and sectors. When looking at the historical data we could see the tech sector was not a great place to have capital allocated in the dynamic we headed into a bit more than a month ago.

For that reason we closed our Tech exposure what has been a great decision. The Technology sector (XLK) is the worst performer quarter-to-date down -3.9%

The sectors that perform well in this environment are Consumer staples (+7,14%), Utilities (+11.1%) and real estate (+12.3%).

If you want to learn how to create your own Minimalist Portfolio I’ve created The Personal Portfolio Launch.

You can join for free!