Key portfolio: situation at 01.03.2023

The market has been through all sorts of changes during this short month of February. If you have already tested the Silver Star at Europa Park, you know the principle: it goes up very steeply, it goes down just as steeply, it goes up a little again and it goes down again to end up at the same point as at the beginning, or almost.

The Swiss market did the same, going from euphoria to depression several times, before ending slightly in the red (-1%). THE determining portfolio did slightly better, since it ended this month with a small gain of 0.4%. Above all, it avoided the roller coaster of a market that behaves like a manic depressive.

Since the beginning of the year, the portfolio has lagged slightly behind the Swiss market (2.7% compared to almost 4%), which can be explained by an exceptional month of January for traditional stocks. On the other hand, it displays a volatility almost twice lower than that of its benchmark index.

Abandonment of an asset in the portfolio

At the end of December, I was forced to part ways with the UUP ETF, following change in tax regime in the USA on listed partnerships. I had managed to find an alternative solution in extremis via the CSHD ETF, which replicates the EUR/USD. CSHD is indeed strongly negatively correlated to UUP (mainly composed of USD/EUR). This therefore allows you to play in the opposite direction.

But fate seems to be against this monetary strategy since during the month of January, the margin requirements for CSHD went from 25% to 100% to maintain the position and even to 125% to initiate a short position. This is problematic, because this approach only makes sense if one can bet for or against the EUR/USD.

In the meantime, margin requirements have come down to reasonable levels, but they may well rise again. This disrupts overall portfolio management, especially since, in order to comply with the principles of adaptive allocation, given CSHD's low volatility, the ETF's position is relatively large compared to other assets.

If we add to this that CSHD's short selling interest is quite high (2.03% per year currently, almost double that of UUP), it starts to add up to a lot for a strategy that is certainly still profitable, but much less so than what was initially planned with UUP, before the change in tax regime.

This asset is therefore now being removed from the determining portfolio. The CSHD position is closed, with a small gain of 2.5% in CHF, which is still appreciable over this short period of time.

Active still in testing

Unfortunately, the months follow one another and are all the same. I still can't make the asset that I have been testing for many months now productive. Until a few days ago, I thought I could start in March. However, once again a small grain of sand has come to disrupt the machine. If I didn't believe in the undeniable potential of this new strategy, I would have given up a long time ago. I will therefore persevere in the hope of really being able to deliver a proper copy next month. In the meantime, the position is still marked in the portfolio as "Asset under test".