A Smart Well-Hedged Portfolio

We’re most certainly still in a choppy, cyclical market environment – experiencing the wild swings I told Boom & Bust subscribers to brace for in their issue of 5 Day Forecast. This market-oriented alert goes out every Monday morning and prepares investors for the week ahead. It’s complimentary with your subscription to Boom & Bust.

The good news is our Boom & Bust portfolio is holding up just fine. I dive into the specifics of how our portfolio has weathered the last month in our November issue of Boom & Bust – make sure to sign up here to begin receiving our must-read research.

Simply put: the Boom & Bust portfolio is well-hedged!

Not only do we have bearish plays that made good gains during the sell-off… we also have unique long-stock plays that are doing well by taking advantage of trends outside the equities market – particularly, falling interest rates and weak commodity prices.

And since our portfolio’s well-balanced nature is proving effective, we don’t need to make knee-jerk reactions – or major adjustments to our positions – amidst this volatility.

Let’s take a look at these themes as we go around the global markets in 10 seconds…

Global stock markets rose sharply and in unison last week. Short-term, the prior three weeks of selling became overdone, setting up the perfect conditions for a dead cat bounce. Whether the rally will have legs through year-end, and to new highs, is still unknown. Equity markets are still in recovery mode, so be cautious. Still, it’s good to see that U.S. stocks (SPY), which rose 4.2% last week, are outperforming Chinese (FXI) and emerging-market (EEM) stocks, which gained only 1% and 0.75%, respectively. That means the most recent trade recommendation added to the Boom & Bust portfolio – a trade we’re calling “All About the U.S.” – gained value last week.Bond prices pulled back just a little after a good five-week run higher. The one exception was junk bonds (JNK), which gained 1.1% last week alongside the return of the equity bulls.Commodity markets were lower across the board. Natural gas (UNG) suffered the sharpest drop, losing 4.3%. After making a low on January 10, UNG shot 44% higher into February 28. But now, that entire gain has been erased as natural gas is trading at its lowest price all year.

Looking Ahead…

I can’t share with you the specific contents of the Boom & Bust portfolio, but here’s what I’m telling subscribers:

“We’ll do best by sitting on our hands through this choppy, volatile environment. We’re in “no man’s land” right now, with no clear trend, but a lot of sharp moves back and forth. Investors notoriously get “chopped up” in these environments when they try to time each twist and turn.

I’d rather keep a close eye on our portfolio’s net performance, to ensure our hedges are doing what they’re supposed to, and waiting for a clear trend to show itself before making drastic changes.”

  

Adam