Monthly Asset Allocation

The updated monthly asset allocation table is now available here.

Unbelievable. There is a month and a half I was bitterly observing the mediocre performance of my portfolio in the first half of the year compared to the market and the very next day everything changed. My stocks have only progressed, sometimes very steadily (some having climbed in one day to 15%), while the markets have encountered considerable difficulty during the same period. I am of course still far from catching up with the delay accumulated since the beginning of the year, but I have the feeling that something is happening, a kind of paradigm shift, or rather a return to normality. Let's see what happens.

Even though Swiss stocks have struggled this past month, they are still in a strong trend, helped by months of very strong growth. Their price remains very dissuasive. In the US, also very expensive, they performed better throughout the month, until yesterday evening, when they plunged, despite the drop in interest rates. Indeed, Jerome Powell, chairman of the Fed, specified that this temporary decrease did not mean that we were going to move towards an aggressive rate cut regime, but that we were rather in a mid-cycle adjustment. In other words, it is a rather temporary movement and we risk going back in the other direction, which the markets did not like at all, especially since they were expecting a much more lenient speech. Trump must have laughed at the same color as his hair.

European stocks are still quite interesting, with a correct valuation and a slightly positive trend, but losing momentum. They may even move into bearish territory quite quickly depending on their reaction to the American markets. In the English, we are at the same stage as last month, with a valuation similar to European stocks, but with a trend already slightly negative. So let's remain cautious with these two regions.

In Canada we are also in a similar configuration in June, with a fairly marked positive trend, but prices a little high in general, but much less than in their southern neighbors. So there are possibly some opportunities to be found there, but for the moment I have not found anything interesting. It's the same story in Australia.

In Japan, full of nuggets at knockdown prices, we are finally moving back to a positive trend. It was about time. The turnaround has even been quite spectacular on certain stocks, notably small caps oriented towards value investing. Several of my stocks have performed really well, such as Nitto Fuji Flour Milling Co Ltd and Organo Corp (both nearly 10% in one month), as well as Otec Corp (over 15%). I have a significant amount of other titles that I covet so I am looking forward to being able to activate my cash reserves.

In emerging countries, which are also generally experiencing slashed prices, the trend has, however, followed the opposite path and is now moving into negative territory. I have also started to sell off some stocks that were going downhill (Asia Cement China & Build King Holdings), although not without making some gains along the way (23% in 3 months, resp. 10% in 6 months). This compensates for other previous losses in these decidedly very volatile markets.

Gold continues to perform well, despite yesterday's decline. Its positive trend is well marked and its valuation compared to stocks is interesting from a historical point of view. Given the uncertainties to come, it remains a must-have in the portfolio. The same goes for Swiss real estate, which has continued to climb since the beginning of the year (+14%).

As for Swiss long government bonds, they are still to be avoided because of the negative rates. In the USA, however, it is a different story, since they pay fairly decent coupons and perform well (especially yesterday evening!). These long bonds really do good in an equity portfolio.

Finally, in terms of target cash reserves, they are falling very slightly to 6%, due to the return to favor of Japanese stocks (but not more because of emerging countries which are following the opposite trend). Medium-term reserves remain invested in USD, which performed well against the CHF in July (+1.74%). My current cash reserves still amounting to 17%, I still have room to reach the target amount of 6% and therefore enough to draw on the Japanese market!

Have a great summer, and don't forget to complete the survey, if you haven't already.