Determinant portfolio: situation as of 01.11.2024

Who is the big idiot who imported Halloween from the USA? It is no longer possible to watch the New York fence without being harassed every 5 minutes by a bunch of prepubescent weirdos in need of sugar. Even Wall Street, which closes in the deep red, seems to hate this stupid holiday, that's saying something.

That being said, the determining portfolio closes this month of October on a performance of +0.3%. It thus easily beats its reference index, the MSCI Switzerland, which is sinking into the red (-1.9%).

This gives us a performance in CHF over the last twelve months of 18.8% for the determining PF, which is clearly outpacing the Swiss market (+11.8%). For the moment, 2024 is looking promising. However, let's remain vigilant, especially since the American election is fast approaching. It risks continuing to disrupt the least and lucky is the one who can predict the turn of events.

I am expressly displaying fewer stats and graphs this month since the PF is under construction. I will relaunch a complete (and also renovated) report as soon as the transformations are completely finished.

Portfolio Update

The wallet will be updated shortly in the members section. It displays the mentioned adaptations recently :

• I removed the CSPX ETF and replaced it with QQQ, XLV and VDC. This brings the portfolio in line with the PP 2.0. After running a series of backtests, I came to the conclusion that this triad of ETFs is the best possible combination. This change only affects people who did not trade stocks directly. They can therefore, if they wish, replace CSPX with these three instruments, in equal parts.
• I removed the unemployment indicator (which was only used for Micro Caps). Following the increase in the frequency of rebalancing mentioned recently, my backtests reveal that the usefulness of this macroeconomic indicator is less and less obvious. The desired decrease in negative volatility is in fact achieved at the cost of a decrease in profitability that is too significant. The same goes for momentum.
• I have found, so far, only one stock for the new "Value" strategy I mentioned. Since it is a small cap, just shy of being in the Micro Caps, I have added it to this strategy. I have not found any stock of interest for the "Growth" strategy, also mentioned in my recent post. Perhaps it would be better to include these two approaches in the already existing strategies. After all, Micro Caps and Blue Chips already cover these two aspects. This deserves further reflection, as well as some testing.
• I removed the line concerning US Treasury bonds. In my backtests, with the new PF configuration, they no longer provided anything in terms of risks/benefits.
• I removed the lines about cryptos, for the same reasons.

With these changes, the portfolio's appearance is becoming increasingly refined. At the end of last year, I began a process of "complex simplification", aimed at focusing it on the most relevant assets, both from a profitability and risk perspective, while making it more coherent and intelligible. Today, we have probably reached the culmination of this approach. However, this new apparent simplicity hides increasingly advanced thinking and testing.

In the coming weeks, the PF will gradually continue its transformation, in order to be ready for 2025. The Blue Chips will undergo a concentration phase, with the aim of ending up with only ten or so stocks, three times fewer than currently. As I mentioned recently, the idea is to focus on those with the most potential in the short and medium term, while keeping the others up our sleeve for later. This means that instead of being permanently invested in around thirty stocks, we choose the ten best at the moment (in particular on the basis of value and quality criteria). The weight of each stock in the PF will in return be increased, which means that the share of Blue Chips will remain the majority in the PF, even if it decreases slightly.

Micro Caps will be slightly strengthened on the contrary. The exact weight will still depend on my thoughts about the "Growth" and "Value" strategies. Gold, the last vestige of tactical asset allocation, will gradually be strengthened in order to play its role as a shock absorber, by partially filling the space left empty by Treasury bonds. Trading Auto Signal will be somewhat underweighted, with the aim of bringing it back to the same level as gold. I have noticed that both play their role of counterweight to stocks very well when combined in equal parts.

In a way, the TAS advantageously replaces the PP 2.0 Treasury bonds. Like the latter, it protects the PF when the market falls, but in addition, and unlike bonds, it also accompanies it when the stock market soars. Those who do not want to or cannot follow the TAS transactions can therefore replace it with a fixed position of Treasury bonds (TLT ETF).

I hope you are not too disturbed by all these changes. If I make them, it is because, following many backtests, I am convinced of their relevance. If so, do not hesitate to let me know if you have lost track. I have indeed noticed that a few members have recently left the ship. It is paradoxical, while the PF is having a very good year.