On Friday, the central bankers of the US and Europe reported that they will take firm interest rate steps to curb inflation. They see this as their main task. The economy has not entered a recession, the labor market is good but inflation - mainly due to energy prices - is way too high. Rising interest rates are bad for equities, so my analysis this weekend was not optimistic.
Our portfolio was at +4.5% on Thursday afternoon and seemed to be on its way to 5%. The end of August 5% is fine, then the end of the year target of 8% can be met.
On Friday the stock markets went down hard, the DOW 3% and the Nasdaq 4%. Our portfolio - already small, few positions bought - contained mostly energy and industrials and held up nicely around 4%. Yesterday, too, the markets fell and we held up just fine. This morning the markets started to rise again and at 10 a.m. the AEX was at 707 with a big plus. We were also in a good position.
Then it began to gradually cool off today and after the poor US opening, everything is now thundering back down, the AEX is now - Tuesday afternoon at 5 p.m. - more than one percent in the minus at 689.
I cannot explain to you why on Friday and Monday we did not suffer from the declines and now suddenly we do, but the fact is that this afternoon our portfolio also suddenly went down. Two positions closed, one with gains and one with losses, and now with only ONE position left in portfolio we are at + 2.56%. It's hard work for little gain. Things have been nicer in the stock markets. We are doing substantially better than the AEX this year, but that's all there is to it.
Kind regards,
Franciscus Roorda.
Eurofuture