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Portfolio Update – January 2023

Contents of this month’s post include:

  • Market Update of the current economic regime
  • Monthly Portfolio Update for January 2023 with a fresh set of charts

We are finally off to a new year – one which can (almost) only be better than a disappointing 2022.

January 2023 has started exactly like we had wished for, with strong performance for the All Seasons Portfolio strategy, thanks to lessening dears of interest rate and inflation.

Instead, it seems like that in 2023, all eyes will be on the growth story: will the central banks, led by the Fed, manage a soft landing, or will a recession hit us? That will cause a different portfolio dynamic on the relative performance of assets than what we saw in 2022.

When the market more focuses on growth, the correlation between stocks and bonds is expected to again fall toward 0 or even a negative figure. In the past year, with inflation and interest rates running the headlines, the correlation was high as both assets fell in tandem. However, with rising growth, it would spur stocks but harm bonds, while a recession leads to bonds thriving. Our portfolios are balanced to perform decently in both scenarios.

Let’s now start with a macro update, before we then jump into how the All Seasons Portfolio has performed in the first month of 2023.

January 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?

As alluded to in the December 2022 monthly update, the main story for the past year has been the inflation story.

I the United States, however, that may be coming to an end, as the inflation rate is waning (slightly down to 6.4% in January, vs. 6.5% in December). Instead, the focus is shifting to the growth rate of the economy and whether the Fed will be able to engineer a “soft landing”.

Adjusting for inflation, the YoY GDP growth rate of the United States is barely above zero (0.90% YoY in December 2022 and 1.02% YoY in January 2023 – note that the below chart smooths the numbers by averaging the last three YoY numbers as 0.59% to better show any emerging trend), but has stabilized around this no- to low-growth level since coming down abruptly last spring. What is more, the PMI – a forward-looking indicator of economic growth – has fallen for 8 months straight (albeit having been unchanged between August and September 2022). Note that prints below 50 indicate a shrinking economy, and the last print as of end of January showed 47.4.

There is therefore reason to be cautious with growth assets, i.e. stocks, in this environment of heightened uncertainty about the healthiness of the economy. While other indicators remain favorable, for example, the employment rate remains high, it seems like the only recession signal is that the United States may enter into negative growth later in 2023 (if it does). This of course qualifies only as a “technical” recession, while a proper recession is a much broader term that also includes i.a. layoffs.

We also see from the chart above to the right that the 5-year breakeven rate, measuring inflation expectations, has also been coming down from the peak last spring. The market thus currently expects that the average inflation rate over the next fiver years will be close to Fed’s long-term target of 2%. With the inflation rate currently being high above that number (6.4% currently), we should also expect postings below the 2% during the next 5-year period for the prophecy to come true.

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).

As we have been able to see for a while now, the trend in the inflation has been falling steadily for the past 7-8 months also when measured against the trailing 12-month average.

What we might start to see with the last GDP print could be an uptick in the economic growth trend (the yellow diamond on the below chart to the left is moving toward the right). If this persists, the possibility for a smooth landing might actually be increasing. If this trend can be confirmed over the coming months, together with PMI stabilizing, a larger scale drawdown for risk assets might be avoided. However, as I so often iterate on this blog, we are not making predictions, but preparing the portfolio for any eventuality (see a recent post from February on this very subject).

CMC Markets logo 700x410

The same cannot be said about the trend in the forward-looking indicators, as the cluster of datapoints in the left half of the right-hand-side chart shows. As mentioned before, the trend in PMI remains negative, and as the breakeven rate has barely moved in recent month versus it past 12-month average, the dots remain resting on the horizontal line.

In other words, from this data, we could be nearing the disinflationary bust quadrant, as inflation appears to be coming down, while the growth outlook is lagging.

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.

January 2023 All Seasons Portfolio Update

For my portfolios, January was an unusual month in relation to what we had gotten used to in 2022. We saw 2023 get off to a good start, with portfolio performance comfortably in positive numbers. Finally, some redemption after the tough last year.

If we start with my eToro portfolio, which is an All Seasons Portfolio that is levered 1.34x times, the portfolio ended the month by being up 7.06%.

The best performing asset in January was cryptocurrencies, which is hardly surprising given how volatile this asset class is. Of the “more traditional” assets, stocks and long-term treasury bonds, thanks to lessening fears for further rate hikes (rising rates are harmful for both of these assets). Both of these were up by about 15% over the month.

Conversely, as the complacency on the stock market has gotten a hold, VIX – measuring the implicit volatility in S&P 500 options – was the worst performing asset in January, drawing down about 20%.

My eToro portfolio @AllSeasonsPort over November 2022

As for the return contribution, the below illustrative summary shows how stocks and bonds positively made up most of the portfolio’s return this month. Here you also see how relatively little impact the declines in VIX had on the whole portfolio, as the allocating to this tail hedge is rather small.

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. It is only in the commodity space (including gold) where we have been somewhat overweight in this still inflationary period. Gold has been a positive contributor to portfolio returns in 2023 thanks to the falling real rates as the size of rate hikes is declining while the inflation rate is coming down.

If you are already 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, January also gave us a good start of the year, with a positive return of 3.37%.

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.

Still, the portfolio has not been performing as well as volatile stocks in this period. Other asset classes have kept the performance a bit subdues in the last three months. Moreover, the American S&P 500 index has been ripping upwards more violently than global stocks, which makes for a bit of there difference in my portfolio (I hold JPGL for the stock part, which is a global multi-factor ETF). Additionally, the S&P 500 is shown here only for illustrative purposes, but it is not a proper benchmark for an All Seasons Portfolio.

Here follows a chart of how each asset class performed over the month. It echoes the performance of my eToro portfolio, with cryptocurrencies (here only Bitcoin) rising a lot, while VIX saw a poor month. Most other asset classes were grouped at around par for the month, with a slight positive return.

Zooming out to a 3-month chart of each ETF, here the portfolio is slightly positive on this horizon, with stocks and bonds being the best performers, while commodities, VIX has been consistently down. Bitcoin’s recovery here is rather impressive, after the 2-month slump.

Lastly, as usual, here is the table of my ETFs and the changes laid out in table form.

ETFNameAsset Class2022-12-312023-01-31Change (Hold)Change (ETF)
UIMBUBS LFS Bloomberg TIPS 10+ UCI ETF(USD)AdTIPS€759.00€793.504.55%4.55%
FRC4UBS LFS-Blmbrg Eur InflLnk10+ UCIT ETF(EUR)AdTIPS€537.23€549.322.25%2.25%
DTLEiShares $ Treasury Bond 20+yr UCITS ETF EUR H DLT Treasury Bonds€552.24€583.445.65%5.65%
DBXGXtrackers II Eurozone Gov Bond 25+ UCITS ETF 1CLT Treasury Bonds€524.36€551.325.14%5.14%
3TYLWisdomtree Us Treasuries 10Y 3X Daily LeLT Treasury Bonds€453.60€474.184.54%4.54%
M9SAMarket Access Rogers Int Com Index UCITS ETFCommodities€456.00€447.04-1.96%-1.96%
JPGLJPM Global Equity Multi-Factor UCITS ETF - USD accStocks€1,757.79€1,810.422.99%2.99%
VOOLLyxor S&P 500 VIX Futures Enhcd Roll UCITS ETF AVIX€131.52€106.56-18.98%-18.98%
Currency:BTCUSDBitcoin XBTCrypto€77.39€105.2235.96%35.96%
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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