Riding the wave, how amazing – be aware, is not endless

Investors’ focus remains on Tech stocks. However, rally ran out of steam – healthy consolidation?
Question of timing and turning point in the interest rate cycle – SNB started – when will major central banks follow? - Too much focus on this topic
Market volatility on low levels - starts to rise
Signals potential of more bumpy days ahead on financial markets
Riding the speculative wave – Be aware, the momentum can change quickly

My Portfolio:
Major changes in allocation during last weeks – left several parties – joined new sectors, adding commodity exposure
Bye-bye Tech sector
Reduced my overall equity market exposure and risks
Started to build up short positions - single names and via ETF (find below the list)
Long volatility exposure via ETF
And, it has been a while: Change from being fully invested to having a certain cash pile – waiting for attractive re-investment opportunities

Financial markets saw another period of mainly strong gains as prices were pushed higher to some new record levels, also driven by speculators. Overall, it seems that this rally runs a bit out of steam. Which can be interpreted as a healthy sign of consolidation.
However, in some areas, speculations are still in full swing. Recent example, the Cocoa price, starting the year around USD 4’000, recently moving to over USD 10’000 in no time.

Timing of the turning interest rate cycle

With the latest central bank keynotes, investors have the evidence, that there will be lower rates in the nearer future. The big question by investors still remains: when this turning rate cycle is going to happen, in summer or later?
As already mentioned in my former articles, there is too much focus on the timing of this rate reductions. It is important to keep this investor behavior in mind, as it has an impact on current market environment. Any kind of comments by Fed chairman Jerome Powell or a member of the central bank can influence markets in either direction. With this kind of short-term interpretations and potential of occurring concerns, more bumpy days can be expected at markets. However, they do not change the overall picture from what we know so far.

The Swiss National Bank (SNB) surprised markets in March, to be the first key central banks lowering the interest rates already. The special circumstances of the strong Swiss Franc led to a rather subdued inflation compared to other economies. This gave the institution the opportunity to take this step of a rate cut already now.
The European Central Bank (ECB) and the Fed need more evidence from economic data to dare to make this step.

Riding the Wave - Be aware, it is not endless

Financial markets repeatedly show patterns of waves. Investors aim to follow a strategy of capitalizing on these trends. Actually, such a trending phase with positive momentum is the easiest in generating great profits in a very short time period.
With speculating investors joining the market, asset prices can inflate rapidly beyond their intrinsic values, which can even lead to a certain bubble. During such a bullish phase, with an increasing number of investors trying to profit from such a cycle, prices are mainly just going in one direction. Stock prices are rising, and usually a specific sector does outperform the broader market, as we could perfectly observe with the Tech sector and especially stocks related to the artificial intelligence (AI) field.

It is important to be aware of such patterns of market dynamics, to keep an eye on indicators, and the factors driving current trends. It includes being informed about global economic conditions, company fundamentals, technical analysis, and news events that could affect market sentiment.
Investor awareness also involves recognizing signs of change in market patterns that may indicate the wave is about to crest or crash, signaling a potential reversal or the end of a trend.

All this is part of my daily work, observing market moves, following news, their impact on stock prices and much more.

Timing is key

It is crucial to keep in mind, that such a wave is not endless as no trend in financial markets lasts forever.
Looking back at market patterns and charts, to catch such a wave seems to be rather easy. However, for private investors it is often tricky to find the right timing of entering and even more important, when leaving. A high number miss the opportunity of big profits. Lack of information and time to follow markets are the main reason.

Obviously, it makes sense to ride the wave as long as possible and capitalize on the situation for realizing the best profits. However, it is like staying on a party, you should remain focused to realize when is the best time to leave it, without hesitating.
Therefore, I am convinced and my track record of investment results confirms that timing of making investment decisions is key!

My Portfolio:

Bye-bye to the Tech Party – Profit taking in several sectors

With market patterns changing, as speculative trends seem to run a bit out of steam, I decided to leave the Tech party. I took profit in several steps during February and March. Not only on US Technology stocks.

1. Profit Taking on Nasdaq:

An important rule while investing, not getting too greedy. Easy said, but sometimes rather not that easy to implement. It is key to follow strictly the own investment rules which should be defined already before starting making investments.
As published in my article on 27th October 2023 “Sind alle guten Dinge 3? Erneutes Fenster zum Einstieg”, it was the perfect timing to gain exposure to US Technology stocks via an ETF on Nasdaq. Within a very short time of period, only 4 months, I could realize gains of more than 90% with my exposure via a 3x leverage ETF.

With this investment call to leave the Tech party, I clearly do not follow the mainstream view. Lately, everybody was pushing on the Tech and AI topic. And this was exactly one of the indicators signaling me, that it is the moment to watch the time to say bye-bye to the Tech sector, at least temporary.

My Investment Calls on US Tech stocks
Chart Nasdaq Composite Index
since 07/2022 - 04.04.2024

2. Profit Taking on US Financials

As published in my article on my ETFMandate blog on 14th March 2023, “Bank Run sorgt für Beben an Finanzmärkten – Erinnerungen an 2008 - kommt es zum Flächenbrand?” there was an opportunity investing in banking stocks.
The whole sector came heavily under pressure with the banking crisis, with its origin in the regional area of the US. Finally, a dramatic rescue of the Swiss bank Credit Suisse with the forced take-over from UBS could prevent a global crisis.

I invested via an ETF on US Financials and on European banks and even added some single names to my portfolio.
While the investment call on European banks is still running I took profit on US banks. My profit, I could log in was over 30% plus the dividend of roughly 2% within exactly 1 year investment period.

Chart ETF on US Financials
01.01.2023 – 04.04.2024

This event led to another opportunity in the regional US Banking sector. It needed a bit more time to have more evidence for a rebound. A matter of timing to benefit and catch the full potential of the recovery by investing in a well diversified investment product, an ETF on US regional Banks. In less than a year I earned more than 30% plus the dividend payments over 3%.

Chart ETF on US Regional Banking stocks
01.01.2023 – 04.04.2024

The investment call on European banks is still running. The first step to enter this sector was rather too early. It was before the spill-over on Europe really happened. Then, the market did not believe yet that with the fall-out and rescue of Credit Suisse the feared domino-effect can be avoided. A moment which was offering a second investment opportunity later in March 2023.

Overall, European banks never really recovered from the European banking crisis back in 2008 and the Euro crisis in 2010. US banks did much better. Therefore, there is a bigger upside potential remaining. However, with the latest strong upside move, I am ready to close this investment call as well. So far, on 19th March 2024 I have took profit after exactly 1 year being invested on 1/3 of the overall position realizing profit of 26% plus the dividend income of 4%. The remaining position is currently up over 35%.

Chart ETF on European Banking stocks
01.01.2023 – 04.04.2024

3. US Biotech sector – offered a great opportunity

The biotech sector was way out of focus for a longer time period. As you can see in the chart below, the sector had a long downturn since its high in the beginning of 2021. During such a downtrend, it is always worth to keep an eye on it. End of last year prices almost reached the low levels of corona crisis, offering an opportunity for at least a mid-term rebound. Just 3 days after its low, I took the decision to enter this sector via an ETF on 2nd November 2023.

With the rebound coming to an end, and risk controlling measures in place, I realized the profit on 11th March 2024, earning 44.5% whit this specific investment call.
Prices corrected already over 10% since. As this sector is rather volatile and the biotech industry offers long-term potential, there is a big chance of re-entering.

Chart ETF on US Biotech stocks
01.01.2020 – 04.04.2024

New Opportunities – new Sectors and adding Commodity Exposure

While most market participants were focusing on the Tech rally and the related AI topic, there were interesting windows of opportunity in several sectors outside of the mainstream.

1. Adding Global Miners

Lately, mining stocks were not among the most preferred investments. Uncertainties about future economic development of major economies like the US and China kept investors away from this sector. Therefore, the mining stocks clearly lost ground compared to others.
With my view that China will recover and there is a good chance for the US economy seeing a soft landing, combined with attractive sector valuation and dividend yields, as well as looking at technical indicators gave a good opportunity on 26th February 2024 to add this investment call to my portfolio via buying an ETF on Global Miners and by investing in some single names.

Chart ETF on Global Mining stocks
1 Year (01.04.2023 – 04.04.2024)

2. Increase the Energy sector Exposure

After partially realizing some profit in the energy sector last fall, it was time to increase the exposure again in this sector via the ETF on global Energy stocks. The reasons for this investment call are quite similar to the mining stocks. Investors seem to be too pessimistic on Chinas economy. Furthermore, the OPEC+ (Organization of Petroleum-Exporting Countries) decided to maintain reduced oil output and therefore keep a certain restrained supply. With potential of rising demand in oil, higher oil price levels could be expected.

Therefore, I increased my sector exposure on 14th February 2024 by buying the ETF on World Energy stocks.

Chart ETF on Global Energy stocks
01.01.2023 – 04.04.2024

3. Increase Silver

Silver was already held in the ETFMandate portfolio for a longer time period and was now increased on 8th February 2024.

Silver counts as a precious metal, however, is also broadly used as an industrial metal nowadays. The silver price remained on lower levels and was not able to catch up yet with the performance of gold which became more attractive again with latest outlook on central banks cutting rates and potential of overall uncertainties.

Chart ETF on Silver
1 Year (01.04.2023 – 04.04.2024)

4. Adding Platinum

With a similar reason adding global mining stocks and silver, I took the opportunity to add Platinum to my ETFMandate portfolio on 26th February 2024. I saw an attractive level that day and expect some upside potential.

Chart ETF on physical Platinum
1 Year (01.04.2023 – 04.04.2024)

Reducing Risk and the overall Equity Exposure

As already mentioned in my latest articles published on my ETFMandate Blog, I took measures in the meanwhile to protect my portfolio to certain potential of market correction, which could lead to higher volatility as well.

Short Positions - Semiconductors

I already showed the chart of Nvidia in my last blog post by end of February (“Speculators in the Driving Seat – Fasten your Seat-Belt!”) mentioning that this has a similar pattern to the charts I have observed during the Dotcom-bubble.
Stock prices going up like a vertical line cannot be healthy and sustainable. When you can read in any publication receiving from banks, on any posts in social media about the topic AI, and you see this tremendous up moves in no time, I call it definitely pure speculation, also knowing that there was a great past performance already.

A way to benefit from these moments of exaggerating investors is to going short, means to sell these stocks not owing them yet and to buy them back later in best case on a lower price level. With Nvidia and its peers almost endlessly skyrocketing, I decided to go short this sector on 6th and 7th March 2024, by buying an ETF on short Semiconductors (leveraged). After 9 days I could already realize a profit of 20%. I stay invested with 2/3 of the initial position.

This investment call has a short-term perspective and can be closed anytime.

Chart ETF on short Semiconductors (leveraged)
YTD (01.01.2024 – 04.04.2024)

Short Positions – single Stocks

The aim of short positions is to sell a stock without owing it and buy it back later on a lower price level. This results in a gain. By far not all banking platforms are offering this way of investing. Selling short, this I can only recommend to well experienced investors being aware of the specific investment risks.

Among my current single stock short positions:
Swissquote, Stellantis, Ferrari, Daimler Truck, Novo Nordisk, Zealand Pharma, Dell, Super Micro Computer, Crowdstrike, Arista Network, RadNet, Ralph Lauren.

This list can change any time as portfolio risk measures are in place in case the stocks are significantly moving in the opposite direction as expected. So called stopp orders are in place and will be adjusted on a regular basis.

Long Volatility

As already highlighted above, markets almost knew only one direction, the way up. In such an euphoric environment, investors forget about market and other risks, which could have a negative impact on equity indices. In this case, volatility is decreasing slowly but steadily.

With any, even unforeseen event, market regime can change quickly leading to a sharp increase in volatility while stock prices then in general are heading south. This is way, volatility can be used to protect the portfolio against a certain downside. Volatility is usually negatively correlated to stock prices.

As mentioned above, I expect a bumpier road ahead for coming days and weeks. This will certainly have an impact on volatility. With volatility expected to rise, I decided to add volatility exposure to my ETFMandate portfolio via a leveraged ETF in several steps (s. chart below). The chart shows the VIX Index (Volatility Index of the S&P 500 Index) and does not show the ETF performance. However, the points where the investment decisions were taken are highlighted.

This investment product is only implemented for a shorter investment period. Specific characteristics of volatility, future curve have to be well known to understand the price move of the product. Therefore, I can only recommend this specific investment call to well experienced investors with a certain risk budget.

Chart on VIX Index
01.01.2023 – 04.04.2024

Cash Pile in place

Last but not least, a major change of my portfolio allocation is not only the reduction of my overall equity exposure via the short calls. I also started to have some cash after being fully invested for a long time. I wait for better re-investment opportunities. As already mentioned in February, I do not see the situation to start making the big investments, only very selected ones. Better opportunities and entry points should be ahead.

There are still more investment calls in place in my ETFMandate portfolio which were mentioned before in my publications, e.g. on the 27th of October 2023, highlighting several opportunities (China, Europe, US Small & Mid Caps etc.). China did not fly so far, however there are signs that the dragon is finally waking up. There will be more updates going forward.

All investment calls mentioned above and in my past articles are all implemented with my own money. Therefore, the calls are very selective and done carefully, always with the goal to earn and realizing gains and keep my assets growing.

Disclosure of shares in my portfolio specifically mentioned in this article (as of 4 April 2024):
No specific disclosure as all holdings are mentioned in this article already