Key Themes Heading into 3Q23.

We are approaching a turning point as we approach the year's midpoint. I have been signaling that sustained high inflation will be a drag on growth. The further we move along in the year, the more pronounced this will become.

In India (which we are long), things are looking more positive. It’s leading the world in economic growth and looks to increase its accelerations in the second half of the year with high domestic demand and government spending.

Europe continues to improve as it moves out of its industrial recession. However, the recent political turbulence in France has raised some new questions. Therefore, we are not long France, even though it’s one of the big European economies. The Netherlands and Germany are performing great, which will be enough in terms of exposure on the European side.

Things continued to get worse in China after we got out in time before the big move toward the downside. Chinese Industrial Production Growth slowed to +5.6% in May from +6.7 % in April. 

The big topic remains inflation.

As commodity prices continue to rise, we already see what we will be getting in terms of Producer and Consumer Price Index readings. The Fed will have a hard time justifying raising rates as growth will be slowing, but we are confident our inflationary plays will pay off strongly in the second half of the year.

The Portfolio

We are slightly lagging the MSCI World Index what is up 13% while we are up 9,9%. I’m confident our inflationairy positioning will pay off this second half of the year so for that reason I will be keeping our portfolio the same. The most important changes I’m keeping an eye on are WTI Oil what is making nice moves and is greatly positioned for inflation to keep going up. As Bitcoin is struggling to keep it’s momentum going I might be trading my Bitcoin exposure for WTI Oil exposure soon. I’ll keep you updated.

Let’s get into our current positioning.

Utilities Sector (XLU) -0,5% Since Entry 14^th of June

Great sector to be long now that growth is slowing. Very stable and defensive.

Industrial Sector (XLI) +1,6% Since Entry Fri 31 May.

The Industrial sector is a great place to allocate capital in a macro environment of rising growth and inflation.  

Copper -7,1% Since Entry Fri 24th of May.

Copper builds perfectly on our theme of rising inflation and rise in chip production.

SILVER (SLV) +8,8% Since Entry Fri 26th of April

Another great inflationary play that has been performing well.

Natural Gas -1,7% Since Entry 14^th of June

Natural Gas is one of the most powerful energy/Inflation plays we can put on. Very happy to include this in the portfolio

Gold +13,1% YTD

Gold has been solid historically in the given macro environment, especially relative to the S&P500. It’s a true classic for holding up as a haven asset in higher-volatility environments.

Germany (DAX) +3,3% Since Entry Fri 19th of April

As we are bullish on Europe, it’s great to have exposure to Germany, which is considered the continent's engine

Netherlands (EWN) +0,6% Since Entry 14^th of June

As the European Recession ended in Q4 of 2023, The Netherlands is a great place to allocate capital.

India (INDA) +14% YTD

The difference in real growth between India and the median G20 economy is set to reaccelerate in 2Q24, while India is already the global growth leader through 2024. 

Bitcoin (BTC) +39,1% YTD

I’m not a crypto expert nor am I a long-term holder but the when the excitement about another bull market starts it makes more noise and draws more amateur investors in than anything else. This makes it a self-fulfilling prophecy and something we want to participate in. 

I hope you enjoyed this edition of The Minimalist Portfolio. I’m grateful to be outperforming together! 

All the best,
Philippe