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Portfolio Update – February and March 2023

Contents of this month’s post include:

  • Market Update of the current economic regime
  • Monthly Portfolio Update for February and March 2023

Before we jump into the market update and the portfolio performance snapshot, let me also take this opportunity to remind you of the article I published recently on the topic of optimal rebalancing timing and rebalance timing luck. We cover the topic of rebalancing and if there is an optimal day to carry out a monthly rebalancing schedule versus the last trading day of each month. I hope you enjoyed the post as much as I enjoyed writing it.

In an attempt to catch up with the monthly updates, we will be reviewing the February and March figures in tandem this time. These two months offered us diametrically opposite results, with February drawing down the All Seasons Portfolio mainly due to weak performance of both stocks and bonds, while March gave us a good rebound with risk-off assets leading the way. More on the portfolio performance will follow further below.

The first quarter of 2023 started off fairly decently with easing inflation fears and with a focus on recession and the Fed’s ability to fend off inflation without killing the economy. From finance media, it has started to sound like a bad romantic comedy with the usual “will they, won’t they” storyline.

Additionally, too much focus is currently being placed by investors on lagging indicators such as non-farm payrolls, which tells us next to nothing about future recessions. Sure, the economy has been able to add jobs at least up until the last month, but there are other indicators that do not look as good.

If we instead review the temporary contracts (the first workers made redundant in the workforce when companies limit spending), the number of such employees has been steadily decreasing since late 2021.

St. Louis Fed’s non-seasonally adjusted temporary help employment.

Interestingly though, as American tech companies continue to lay off employees at a speed that makes your head spin (168,000 layoffs only in 2023 until end of March accordingly to TechCrunch), the companies struggle to succeed with corresponding redundancy rounds in Europe due to the European countries’ stricter and more protective labor laws, as reported by both Business Insider and Bloomberg Law. The effects of this may be that the European workers may be in a better position to fend of a recession than their American peers, which would send waves through the economy, as increased unemployment would lead to more people being unable to service their mortgages and private loans. Perhaps this will be round 2 in the banking crisis we got a first taste of in 2023? (We will be covering the tremors in the bank sector in the portfolio update segment further below)

Increased light is being shed on a coming earnings recession of US listed companies, which will begin to show around 2023 or sometime in 2024 (see for example Meb Faber’s interview with Morgan Stanley’s Mike Wilson discussing this possibility). But while the market is positioned for a recession and a downturn in stocks, that elusive drawdown refuses to reveal itself.

But let us know look at the broad strokes before jumping to the portfolio update.

March 2023 Market Update

First, the usual reminder regarding the All Seasons four-square matrix of macro factors, as more or less all market moves can be traced back to essentially two forces: inflation and economic growth, and especially positive and negative changes in expectations of these.

That gives rise to four possible market regimes, as a combination of the two factors can be summarized by a matrix of four squares with inflation and economic growth on on axis each. The four possible regimes are this inflationary stagnation, inflationary boom, deflationary bust, and disinflationary boom.

This will serve as a backdrop for for the below summary of what market regime we are currently in, which might help us explain changes in asset prices.

Image curtesy of Resolve Asset Management (click to enlarge image)

In what market regime are we now?

If we begin with the inflation story, the trend we have seen since the July 2022 peak has been ongoing, with US headline inflation coming down to 6% by end of February (core inflation of 5.5%, down from 5.7% in January).

The corresponding headline numbers for the Euro Area, shows a decline from 8.6% in January, to 8.5% in February, with a further drop to 6.9% in March (US numbers for March are not yet available), but with Euro Area core inflation being on the rise from 5.3% in January to 5.6% in February and 5.7% in March.

The forward looking 5-year breakeven inflation rate (the difference in yield between nominal and real Treasury bonds with 5-year maturities, indicating an average inflation rate over the period), remains quite stable, indicating the market anticipating the US inflation to keep coming down toward the 2% target.

It is on the growth side where the backward-looking and forward-looking indicators diverge. While growth of the US economy was slow by end of February (0.94% in real terms), the forward-looking PMI continues to trend down. The most relevant question at the time is therefore whether it is possible to drive a car only looking in the rear view mirror, or in other words, can we trust the historical (slightly) positive growth to be a good enough indicator for what lies ahead, or should we worry more about the forward-looking indicators?

Whilst there is a plethora of indicators of various degrees of accuracy, most commonly, they lead the economy and the financial markets by somewhere around 6-18 months. Hence, most of the turmoil for growth assets may still lie ahead.

I do realize that I may sound very bearish (as the similar narrative has been hammered in on this blog for the past few months), I may not be so bearish per se, but direct this narrative to the majority of (retail) investors who have most of their financial assets in stocks. What I mean is that if there is a time to introduce diversifiers to a stock-heavy portfolio, it might as well be now, as there is a lot of uncertainty for stocks in the current market environment.

Even if inflation (both realized and forward-looking) is coming down, which is good for stocks, falling growth, interest rates that are higher for longer, potential issues in the banking and commercial real estate sectors, etc., is hardly promising.

Hence, in the end it doesn’t really matter what my (or anyone’s) sentiment is about the market, because for as long as you follow a risk parity strategy such as the All Seasons Portfolio strategy, you are prepared for most possible outcomes.

With the next two usual charts, we depict the trend in historical inflation and growth, as well as forward-looking expectations. Each data points are measuring the difference between the latest number and average of the previous 12 data points, where the larger dots being the latest numbers (the yellow diamond being the last measure).

Like we could read from the above pair of charts, inflation has been coming down for quite some time, but with the trend in economic growth (backward-looking) improving a bit. However, if we focus on the trend in PMI – one of the most commonly tracked forward-looking indicators – the trend is stuck in the cold.

CMC Markets logo 700x410

In other words, from this data, the expectation is that we are nearing the disinflationary bust quadrant, as inflation appears to be coming down, while the growth outlook is lagging, but it is difficult to foresee the timing of when the forward-looking numbers are translated to reality and the actual prints of historical data.

What this means for asset allocation is that if you don’t already hold Long-Term Treasury Bonds and Gold in your portfolio – both of which usually do well when growth and the real interest rate fall – now is a good time to include them.

But at the end of the day, the beauty of the All Seasons Portfolio strategy is that we are not making any predictions, but rather prepare for any outcome, and hold out for the long term, why both of the mentioned assets are already making up a core part of the portfolio.

Interpreting all charts above, we now have a good understanding of the current environment. Let’s therefore continue to look at my All Seasons Portfolio to see whether theory translates to reality.

If you are looking for getting started with your own All Seasons Portfolio and need some inspiration, check out my post on How to get started with the All Seasons Portfolio strategy. While stocks have been a great investment the last decade, there are no guarantees that this trend will last, as their continued success depends on several factors. Instead, consider diversifying your portfolio to include other asset classes, and benefit from the rebalancing period over the long-term, as described in this article.

February and March 2023 All Seasons Portfolio Update

For my portfolios, the performance between the two months was quite contrasting. In February, we saw a slight decline, which was recovered during March despite the banking turmoil.

If we start with my eToro portfolio, which is an All Seasons Portfolio that is levered 1.34x times, the jigsawing over the two months was most visible, as the portfolio fell by 4.43% in February, and then gained 5.38% in March.

The best performing assets has switched a lot between the months, as carbon credits – the strongest performer in February – is found at the bottom in March, while Long-Term Treasury Bonds (with 3x exposure) fell by more than 10% in February, while gaining almost 20% in March in the flight to safety event.

We can also see that VIX was a strong performer for about half of March. But if you carefully compare the March chart above with the return contribution for the corresponding month below, you can see that while VIX ended the month around at the same level as it started, the return contribution to my portfolio was still positive. This was achieved as I successfully scaled down the long-vol allocation after the spike, meaning my allocation was much smaller on the way down. I have few active elements in my All Seasons Portfolio, but the VIX trading is the most important of them, as this asset has such negative carry that I have implemented a systematic approach to trade this more frequently on volatility events.

As for asset allocation, the portfolio weights are very close to aimed allocations for the time being, with a neutral stance on dynamic risk allocation.

If you already have an account on eToro, make sure to follow me there too, as I from time to time share brief updates there directly about that particular portfolio. The updates I share on this blog will however remain deeper and more insightful. Otherwise, make sure to click the banner below and create an account, (and support the upkeep of this blog financially at the same time by using the affiliate link!).


Trade stocks, crypto and ETFs listed on 14 exchanges on eToro. You can copy my portfolio by searching for user Allseasonsport

Follow me there by finding user Allseasonsport. And feel free to copy my portfolio there with a small amount of your portfolio if you want a more hands-off approach to risk parity investing. I do all my trading there in a systematic and rule-based manner, and already have several copiers (excluding friends and family). I very much appreciate this copy investing functionality, as it makes it easier to follow other people’s strategies, while the investors like myself that are copied have skin in the game as all trades are done with my own money.

As for my DEGIRO All Seasons Portfolio, the same pattern of down in February and up in March could be seen here as well.

As for portfolio allocation, this portfolio is quite fairly balanced, and I have kept the dynamic risk allocation from nominal bonds to inflation-linked bonds through 2022. I have been normalizing my bond exposure again from inflation-linked bonds to nominal long-term treasury bonds in anticipation of the inflation rate culminating, and that there is less interest rate hikes ahead of us than when the rate hiking cycle started. It is likely that we are almost there in terms of American bonds, so switching from US TIPS to US Treasury bonds is more imminent, while I might hold off for a little while longer to do the same change for European bonds.

If we compare to the S&P 500 (which, to be fair, is not the most appropriate benchmark for an All Seasons Portfolio, but one that most investors look toward), over the last 3 months, the performance is approximately at par, but with less volatility to the upside.

Next follows the charts over the performance per asset classes for this UCITS portfolio. Compared to the eToro portfolio further up, we see immediately that the Long-Term Government Bonds sleeve was much less jumpy, which is explained by a) in the eToro portfolio, the exposure is through a 3x levered ETF, and b) the UCITS portfolio also hold European government bonds, which were much less affected by the flight to safety moves following the SVB worries. Otherwise, the assets follow more or less the similar trajectories.

Zooming out to a 3-month chart of each ETF, here the portfolio is slightly positive on this horizon in March, .

By popular demand, I have reincluded a chart on received dividends, which I last had here on the site around 2019 I think. As I know dividends are popular, and a cheaper way to rebalance a portfolio (you don’t need to spend transaction costs on selling), let’s keep this chart in the monthly updates going forward for my DEGIRO portfolio. The main contributors here are the two inflation-linked bond ETFs I have (UIMB for the US and FRC4 for Europe), which pay out handsomely semi-annually in August and February. On a rolling 12-month basis, this corresponds to a dividend yield of 2.25%, up from 0.63% the previous 12-month period.

Rolling 12-month dividends, versus previous 12-month period

Lastly, as usual, here is the table of my ETFs and the changes laid out in table form. Here, the moves are easier to see on the 1-month period, as the outliers of VIX and Bitcoin can make the charts further up harder to decipher.

ETFNameAsset Class2023-02-282023-03-31Change (Hold)Change (ETF)
UIMBUBS LFS Bloomberg TIPS 10+ UCI ETF(USD)AdTIPS€744.51€750.030.74%0.74%
FRC4UBS LFS-Blmbrg Eur InflLnk10+ UCIT ETF(EUR)AdTIPS€524.83€531.961.36%1.36%
DTLEiShares $ Treasury Bond 20+yr UCITS ETF EUR H DLT Treasury Bonds€552.24€572.523.67%3.67%
DBXGXtrackers II Eurozone Gov Bond 25+ UCITS ETF 1CLT Treasury Bonds€520.20€537.923.41%3.41%
3TYLWisdomtree Us Treasuries 10Y 3X Daily LeLT Treasury Bonds€446.88€468.724.89%4.89%
M9SAMarket Access Rogers Int Com Index UCITS ETFCommodities€445.28€422.56-5.10%-5.10%
JPGLJPM Global Equity Multi-Factor UCITS ETF - USD accStocks€1,814.88€1,757.93-3.14%-3.14%
VOOLLyxor S&P 500 VIX Futures Enhcd Roll UCITS ETF AVIX€114.24€112.32-1.68%-1.68%
Currency:BTCUSDBitcoin XBTCrypto€110.75€128.5316.06%16.06%
Cash Position€0.00€0.00

Thank you yet again for following my blog about risk parity investing and the All Seasons Portfolio. If you haven’t done so already, make sure to subscribe to the newsletter via the form in the page footer, and to drop any comments you may have on the content with the comment section below or via email to The greatest value I have received from upkeeping this blog is the fantastic conversations with great people, such as yourselves, about ideas on investing and strategies. Thanks for that!

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We’ll catch up soon for the next update!
Nicholas Ahonen

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