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Uncertainty On The Rise – 20 August 2018

|Includes: AAPL, Facebook, Inc. (FB)

US equities strong.

Uncertainty on currencies, oil and gold.

Since the last post, the portfolio lost compared to the market rally. The main reason for the decline was the price drop of Facebook and Alibaba shares. As the price of FB declined, I increased my stake. Now, I am too overweight by little over 44% of the portfolio. I should reduce it but I am thinking to hold on to it, for now, to see where FB goes from here. So far, I am happy about the stock and am not much worried about fundamentals. Trading around PE of 24, and being one of the two ad behemoths in the world, I think in the long-term Facebook’s future is sound unless an overall market is fractured.

I should not have sold my Apple stake either before quarterly earnings. Since then, the stock has appreciated by 14% and I am reluctant to jump back on a moving train. If I see a pullback, I might start buying Apple shares again. I am fully invested in stocks and have traded neither currencies nor commodities nor bonds. The US stock market is strong so far, and this trend can be carried further to the end of 2018. The market was able to withstand the negativity surrounding US-China trade war, and considering now, the US is in talks again to come to an agreement with China ( Trump did the same thing with EU, talking tough and trying to ease the market afterward). However, I am skeptic this time. Trump really does not like China and he has been talking about it since the 1990s. I don’t think he will really go easy on China. Talks can stall and we can see another market pullback in the near future. Nevertheless, that may not happen before mid-term elections in the US. Trump wants to hold everything together till November elections, can not let the market and economy tumble, therefore, he will put his mild businessman mask for the upcoming few months.

Turkish lira tumbled against the dollar as investors feel worried about Turkish debt ( which was there all the time) and sanctions were just the flare. As the greenback continues its strength, Trump and his administration know that stronger dollar is not good for trade but they have no other option but to accept and support the dollar rise for now (which is what they do). So far, among the developed nations the US seems to be in a better shape and driver’s seat to pull the world economic growth higher.

It’s been quite some time, I have lost my touch on oil and gold and have no idea what is going on that front. Both have been in decline for some time, but I am not ready to hold the position on any of them, as I have not built my conviction around them. Gold is at the cheapest territory since the beginning of 2017 and I might decide to add small positions depending on where the price will head. For now, everyone is rushing to the US stock market and seems investors have lost the appetite and interest in the commodity. after recent months of fall.

To wrap things up, these are difficult times to build a strong conviction on commodities and currencies as the global political game has been intensified from all fronts. Brexit, EU upcoming stop on the QE program, decelerating EM markets growth, Trump’s tweets and actions against other countries, make it harder for me to build a strong thesis. Only thing I am surer of is US equities.

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Disclosure: I am/we are long FB, BABA.