Determinant portfolio: situation as of 01.11.2022

The month of October was marked by a significant technical rebound in the stock market, of the order of 4%. determining portfolio, less subject to this kind of jolt, was content with a more modest progression of 1.6%, which is good despite everything over this short period of time. Let's see in more detail what explains this relative underperformance over the past 31 days.

THE short positions, introduced on last month, behaved in a scattered order, clearly outperforming the market for one, and dragging down the PF result for the other. Taken together, these two positions nevertheless gave a fairly good result, while allowing the volatility of the PF to be kept under control.

THE Japanese microcaps continue to suffer from relatively unfavourable momentum compared to other countries. The size of the position in the PF provides a large part of the explanation for the overall relative underperformance. We will continue to closely monitor each position individually in the coming weeks and months. In the event of clearly negative momentum, they will be sold off gradually. For the moment, however, there is no reason to move. These are very cheap and excellent quality stocks. On the contrary, we will avoid investing in them at present, while waiting for slightly better days.

Despite the relative underperformance of last month (but which remains honorable over one month), the performance since the beginning of this year now amounts to -4.2% against -17.2% for the MSCI Switzerland index. Volatility remains at a very appreciable level, with 10.6% against nearly 21.9% for the aforementioned index.

The new asset I told you about in september is still in the exploratory period. I will have to postpone its introduction into the PF once again. In the meantime, it continues to appear in the portfolio as "Asset under test", just before reserves and liquidities. In the meantime, I am taking the opportunity to introduce an additional instrument...

New asset: currency - USD

As my blogger friend Thomas Aurlant said last month:

There is nothing that is profitable, except perhaps, when you are in the euro zone, having bet on the dollar a few months ago.

It is true that the greenback has been beating all other assets for several months and is one of the only ones that still allows for gains. The dollar even has the luxury of beating the CHF, the strong currency par excellence, by almost 10% since the beginning of the year.

You can buy dollars to benefit from its current momentum and attractive interest. However, you remain dependent on your own currency, especially when you live in a country where the currency has an unfortunate tendency to be strong. You can also have fun trading pairs on the forex, playing the dollar against a weaker currency, such as the yen for example.

You can finally free yourself from your local currency while betting on the dollar, without going through forex and without asking yourself the question of the counterpart. This can be done via an ETF like UUP, which allows you to play the dollar against a basket of currencies (euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc). Its opposite, UDN allows you to play these currencies against the dollar.

According to my backtests, these ETFs perform well as tactical asset allocation, thanks to the help of a moving average of the price and the US unemployment rate. This last indicator, macroeconomic, makes sense since the dollar is directly influenced by the health of the American economy.

This additional asset makes it possible to achieve a few valuable profitability points, particularly interesting in the current climate, all with very little volatility.