I’ve hi-lighted the key characteristics of the coming global debt bomb explosion that investors MUST include in any plan to protect a portfolio from the explosion of this bomb.
So what do you do with your portfolio for the rest of 2023? And what’s your best strategy to be prepared for 2024? In Part 1 of this Special Report I laid out the 10 developments that I thought would drive the financial markets for the rest of 223 and into 2024. Today, in Part 2, I’m going to give you the first 2 of 10 moves to take–with as much detail and as many specifics as possible–that you should be making now to position your portfolio for the uncertainties of the last quarter of 2023.
China’s manufacturing activity recorded its highest monthly improvement in more than a decade in February, while services also showed stronger-than-expected performance. Home sales rose for the first time in 20 months. Which has helped push Chinese stocks higher–along with the belief that the annual People’s Congress meeting that begins on Sunday will produce new stimulus measures from the central government.
What now? I’ve been working to play defense in this Bear Market before there was even a Bear Market. Back in December, I added a drug stock, Bristol Myers Squibb (BMY) to my Jubak Picks Portfolio because it looked like Big Pharma was getting dollars from investors and traders looking for safe havens.
In February I added oil and natural gas, ahead of the Russian invasion of Ukraine. And since then I’ve added ETFs that track agricultural commodities. An ETF based on the U.S. dollar. And inverse ETFs that are designed to go up when prices in emerging markets or the small-cap sector of the U.S.market do down. And, of course, I’ve been selling: early on consumer stocks that looked vulnerable to inflation and recession and more recently technology stocks with exposure to China and the U.S./China trade war. But WHAT NOW? Here’s where I see investors and the market to be right now.
I expect the current Bear Market to go on for a while. To be clear, I’m looking for a bottom in late 2023 or 2024. Either of those dates is still a long way of. And I’m expecting that the bottom, whenever it arrives, will be significantly lower than the 3600 level on the Stanard & Poor’s 500 that has prevailed recently. I hear speculation about 3,000 on the S&P 500. That’s another 20% below the 3600 level. But I don’t expect that we’ll hit that bottom in a straight line. We’ll have significant Bear Market rallies that suck money off the sidelines just in time to catch another leg lower in the market, for example.
Bear Markets seem determined to inflict maximum pain. So it’s extremely important to play good defense. Sell your riskier positions. Take profits, when you have them, when you see signs that a portfolio favorite, even a long-term favorite, is seeing important negative trends in its business. Make sure that the stocks that you’ve decided to hold through the carnage are stocks you really, really believe in: it can be punishing to hold on and hold on, only to lose faith and sell near a low. Build up cash on the sidelines. Find low-risk cash-like positions to use as safe havens as the Bear continues to prowl. But as important as playing defense is in a Bear Market, there’s no reason to abandon altogether the search for profits. Even in a Bear Market, there will be narrow–and probably fleeting–opportunities to make a profit. And that’s what this Special Report is about–finding ways to make money–9 of them in this take–even in THIS Bear Market.
I’m making a switch today (well, actually tomorrow) in the Perfect 5 ETF Portfolio Out goes the iShares Large Cap China ETF (FXI). In comes the ProShares Short MSCI Emerging Markets (EUM). My weighting remains the same at 15% of the five-ETF portfolio.
I’m firmly in the negative camp on emerging markets. If you want to profit from the downward move in these markets, I see two options: one is investing in a fund that shorts emerging markets, like EUM. Or, two, you can buy put options on a fund like EMXC (which tracks emerging markets minus China). There are benefits and downsides to each approach.
I think these financial market curves will let you map out the longer stories of Federal Reserve interest rate increases and a potential recession–and then chart the shorter stories of war in the Ukraine, global oil and natural gas crunches, summer Pandemic relief, global food crisis, computer chip shortages (and whatever else you think might be important) under those longer curves. That will let you decide when to buy and sell (and what) in order to profit from short-term stories while preparing your portfolio for the longer arcs.
I think the trend has finally turned against emerging market stocks. All it took was the threat of a debt default by Russia. That shift is too late for the Brazil and Mexico Put Options I bought on January 24, which expire on Mach 18. But with a Russian debt default looming I’m replacing those Puts with an ETF that shorts the major emerging markets index.
I’m starting up my videos on JubakAM.com again–this time using YouTube as a platform. My one-hundredth-and eleventh YouTube video “Russia’s looming default” went up today.
I’m starting up my videos on JubakAM.com again–this time using YouTube as a platform. The twenty-fourth YouTube video “Three Hedges for a Falling Market” went up today.
