Outperforming while Buying Great Positions at a discount!

The past week must have been very stressful for people without a process. If you have a process like we do at The Minimalist Portfolio, it has been a great week!

The Minimalist Portfolio is up 12,9%, while the S&P 500 is up 11% YTD.

The past week saw a significant correction, which allowed us to optimize our portfolio and buy everything on the wish list at a nice discount.

In the portfolio section, we will discuss the buying opportunity; let’s first examine the most significant data of the past week.

GROWTH

In terms of economic growth, we had Durable Goods data. This key indicator tracks orders and shipments of long-lasting goods, such as appliances, vehicles, and machinery.

This data is crucial because it provides insights into the manufacturing sector's health and the economy's overall direction. High durable goods orders typically indicate strong economic activity, as businesses invest in equipment and consumers buy expensive items.
Conversely, a decline can signal an economic slowdown.

 The 0.7% month-over-month (M/M) gain exceeded expectations, which had anticipated a -0.8% M/M decline. While growth that surpasses expectations is encouraging, we shouldn’t get too excited as it’s only a slight acceleration. The big moves are to be found in the next section on inflation.

Personal Consumption Expenditures (PCE)

The PCE data measures the value of goods and services purchased by households. It's a crucial indicator of consumer spending, which drives a significant portion of the economy. 

It helps understand inflation trends and consumer behavior. Core PCE, which excludes food and energy prices, is often watched closely by policymakers, including the Federal Reserve, for making monetary policy decisions.

There are certainly pockets of fragility in economic growth, but data like this is not the stuff imminent recessions. 

INFLATION
As I’ve repeatedly said, the best way to fight inflation is to be long of it.

The Fed, which calls inflation benign, should look at the following data.

1. CRB Commodities Index (19 Commodities) inflated another +2.3% last week

2. Corn inflated another +2.7% last week.

3. Wheat inflated another +7.1% last week.

4. Natural Gas inflated another +5.6% last week.

5. Orange Juice inflated another +6.3% last week.

PORTFOLIO

The Minimalist Portfolio is performing great, and I’m pleased about the current positioning we have been able to build due to the correction.

The Minimalist Portfolio is up 12,9% while the S&P 500 is up 11% YTD.

This week, I will be taking out our long in WTI Oil. It is struggling to gather momentum, and we already have exposure to it through our Energy Sector long.

A better place to allocate our capital is the Industrials Sector XLI.

Let’s get into the entire portfolio!

Energy Sector (XLE) -2,65% Since Entry Fri 19 Feb 2024

This sector goes up along with inflation regardless of growth. It’s the only actual all-weather inflation sector out there.

WTI OIL +0.7% Since Entry Fri 23 Feb 2024 (CLOSE)
Industrial Sector (XLI) New Since Today Fri 31 May.

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

Copper -3,2% Since Entry Fri 24^th of May.

Copper builds perfectly on our theme of rising inflation and a bullish outlook on China. 

SILVER (SLV) +11,5 Since Entry Fri 26^th of April

Silver continues to build on the inflation theme, performing very strongly.

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) 4,3% Since Entry Fri 19^th of April

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

Enter France (EWQ) -0,9% Since Entry Fri 24^th of May.

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

 India (INDA) +9,1% 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.

 India (we remain long of India $INDA). All of these countries saw new orders accelerate, improvements in employment, and accelerating input costs.

China (SSE) +2% Since Entry Fri 8th of March 2024

China has strongly accelerating Cyclical Data. Including China to the portfolio increases upside while also making sure we include global diversification.

Bitcoin (BTC) +53% 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.