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Portfolio Update – March 2021 – The Madness Is Not Over

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Hi, and welcome back for another freshly baked All Seasons Portfolio update!

Now that we have put the month of March behind us, it marks the one-year anniversary of the coronavirus pandemic and societal restrictions. Hardly, this is something to celebrate, as it has been one of the worst 12-month periods for a very long time, and all we want now is for the madness to end and for us to be able to go back to normality.

We have reached a few months into the vaccination process and hopefully the worst parts of the pandemic should be behinds us. But, it seems like we are not yet over crazy events to surprise us in the markets. Two such impactful evens in March alone were the blockage of the Suez Canal and the blow-up of Archegos Capital Management, both of which were significant events to occur in March. We will look more closely into these events in this article and their potential impact on the economy in the near term.

My point is, that while stock markets are regularly posting ATH marks, there is quite a lot of uncertainty left in the economy, that can be a surprise on the downside for equities. The $1.9tn American stimulus package may help to keep up stock valuations for a little bit longer, but voices are raised that we are witnessing the final exuberant stages of a bubble.

Before we dive into a dissection of three most impactful events of March 2021, I received fantastic feedback on my last post with book recommendations for reading material on risk parity investing, which was published a few weeks ago. I was recommended the book Adaptive Asset Allcation, written by the team behind ReSolve Asset Management, and while I am only half-way through it yet, I think this is a recommendation worth sharing to a broader audience. Check out the description and the bottom of this article for more details of what to expect.

But let us now head straight to a catch-up of what exciting events March 2021 had to offer us.

3 Notable Events From March 2021

While the pandemic offers a lot to be concerned about nowadays, this is not a boring time to be an investor. Over and over, we are surprised by new events which would have caused a panic just a few years back, but are now just shrugged of as the new normal.

Have we already forgotten the storming of the White House and the rallies in memestocks? Almost daily, there are news that draw our attention from the last crazy thing. It’s a mad time to be alive, and I am both terrified and excited for what will happen next. At the same time, I am extremely satisfied my equity risk is rather low in my portfolio, and that I should have decent downside protection in place as a risk parity investor.

Anyway, before reviewing how my All Seasons Portfolio has performed this month, we will take a closer look at the below three events that transpired in March.

  • The blockage of the Suez Canal
  • Payout of American stimulus checks
  • Blow-up of Archegos Capital Management

1. Suez Canal Blockage (March 23)

I am sure you have not missed it, as the main news event of March 2021 was the container vessel Ever Given – a 400m long vessel with capacity for more than 20,000 containers, operated by Evergreen, getting stuck in the Suez canal side to side, and blocking it for six days.

I have kept an extra eye on this extraordinary and interesting event, as the canal had previously only been closed for passage four times since opening in 1856. Impressively long queues of large vessels formed in the Red Sea and the Mediterranean, as the canal usually allows 50 vessels to pass every day. Instead, 370 vessels were left idle, with many operators contemplating to reroute ships the long way around Africa, adding at least a week to the voyage, and bunker costs of about $1,000,000.

The uncertainty of the length of the blocking has caused follow-on effects on financial markets. Firstly, it has been a disruption on supply chains, as the currently employed just-in-time shipping strategies have failed, causing delays and leaving consumers products and manufacturers without crucial components. In a time with already stressed supply chains caused by the pandemic, and the hope of economic recovery after Covid-19, these disruptions could come as a second blow to the economic growth. Moreover, the disruptions also adds fuel to higher expected inflation, with increase in freight costs.

While the container vessel was finally freed on 29 March – Suez Canal ship finally free in boost for global trade | Financial Times ( (pay wall), the troubles do not end there. Now, it is the task of the canal authorities to try to push through as many vessels as possible in a short amount of time to accommodate both the queuing ships and regular traffic. In addition thereto, when the bottle neck now opens, it is likely to put a lot of strain on the port capacity at the waiting vessels’ destinations, such as in key harbors like Rotterdam. Hence, the supply chain delays are not yet over, even though the last queuing ship was let to sail through the canal, and the traffic jam was cleared, on April 3, 2021.

What about the costs of the blocking? All shipping companies have extensive insurances, both for damages to the vessel itself (Hull & Machinery insurance), but also on damage caused on external parties and infrastructure, such as the canal itself (Protection & Indemnity Insurance). According to Financial Times, the insurance claims are expected to be around $150-250 million – Suez Canal insurance claims to run into hundreds of millions of dollars | Financial Times ( (pay wall), being a hit on reinsurers. While a great chunk of the claims will be covered by the insurance club pools, it will be a hit on the bottom line of the reinsurers. Likely, it will not cause a general rise in costs for insurance, but that would depend of exactly how high the claims finally end up being.

Possible consequences: Lower than expected economic growth and slowdown of the economic recovery due to supply chain disruptions and vulnerability assessments, and thereby higher inflation through higher production prices.

2. American Stimulus Payout (March 6-11)

The most significant news story in politics in the month is of course the $1.9 trillion relief package passed by President Biden in the first half of March. This package extends the weekly jobless benefit payments of $300 until September, but more notably, sends a $1,400 check to each eligible individual.

In early March, the bill took its journey through the U.S. Senate (votes 50-49) and the House of Representatives (votes 220-211) and by mid-March, “stimmy checks” have begun being sent to households across the U.S..

The stimulus bill has been deemed an important step toward economic recovery after the Covid-19 pandemic. In parallel with the ongoing vaccination effort, the stimulus package is aimed to spur optimism among households, alleviate lost incomes and strain on the job market, and aid millions of businesses through increased spending.

Recently, the OECD stated that the $1.9tn U.S. stimulus package is not only a vital ingredient for the American economic recovery, but that it is estimated to have a great positive effect on a global scale, adding 1 percentage point to global GDP growth, as reported by Financial Times (pay wall).

The immediate effects of the signing of the stimulus bill has been a further boost to equity markets – caused by both optimism of companies’ growth expectations and increased funds for households to spend – as well as further climb in US Treasury yields – caused by investors seeing the package as inflationary – with the 10Y yield climbing to above 1.70% by late March from 1.45% one month earlier.

Possible consequences: Improved chances for economic recovery in the short-term, especially if the vaccination effort proves to be successful. Helicopter money (“monetary policy 3”) is highly inflationary, and could, in combination with forced household saving for the past 12 months, trigger a demand shock when economies open up, and, in combination with supply chains strained by the pandemic, cause a serious jump in inflation.

3. Collapse of Archegos Capital Management

By late March, Archegos Capital Management is an opaque and secretive family office, that through high leverage and having relationships with several global banks as trading partners, amassed billions of dollars in exposure in volatile equities through swap contracts. The size of the portfolio is reported to have amounted to an astounding $110bn assuming 5:1 leverage, according to Financial Times (pay wall). What is known, is that Bill Hwang lost a staggering $20bn in a record time of just 2 days. Insane.

By late March, triggered by a plunge in the ViacomCBS share price, Archegos failed to meet margin calls after a failed bet, prompting a forced sell-off by its trading partners including the giants Goldman Sachs, Morgan Stanley, Credit Suisse, UBS and Japanese lender Nomura.

Normally, an orderly wind-down of positions to meet capital requirements is the best solution for the trading partner collective to ensure best execution of the sell-down, not to shock the market with excess supply in stocks to be sold. However, in this situation with several giant competing trading partners, in an attempt to limit their own potential losses and exposure to the unravelling family office, prompted a game of chicken between the banks in a competition of who could first sell the client’s assets to best price. When the floodgates opened by the banks, roughly $19bn of stocks were traded in big block trades on Friday March 26. Losses for banks were not avoided, as Credit Suisse and Nomura, each face losses of $3-4bn in the unwinding of the brokerage clients’ positions.

In the reporting of the unravelling of Archegos, a parallel has been drawn to the collapse of Long-Term Capital Management in 1998 – a hedge fund that dramatically unraveled after having had high leverage and negative exposure to Asian financial crisis in 1997 and the Russian financial crisis in 1998. That collapse sent shockwaves across the financial markets as several major banks had had credit exposures to the firm – credit that was now lost. A re-capitalization of 14 global banks in an amount of $3.6 billion was necessary to cover the whole left in the balance sheet by LTCM. LTCM had a debt-to-equity-ratio of a staggering 25:1 at the beginning of 1998 ($4.7bn in equity and $124.5bn in debt) for increasing profits to its investors.

Similar to LTCM, Archegos was an opaque institution, and scattering its trades among several banks to make it harder for onlookers to see what the fund was doing operationally. The worryingly high leverage of Archegos, is a product of the now long prevailing ZIRP (zero-interest rate policy) environment where central banks push down costs of credit, allowing institutions to afford more debt. This makes up for a dangerous environment for the recovery when combined with excessive risk taking in the highly-volatile stock markets, where valuations are kept high thanks to low discount rates, increased stimulus liquidity, and an absence of alternative yielding investments.

Possible consequences: Lower growth/risk-off sentiment: Banks and lenders becoming more risk aware, decreasing leverage among clients, causing selling of and increased supply of stocks due to deleveraging to meet new requirements, and in turn, lower liquidity on financial markets. Asset classes benefitting would be safe assets such as gold and treasury bonds.

To summarize, there are a lot of peculiar things happing in the world currently, and many of them may turn out to result in changes in the market’s expectations in the economic recovery and the future inflation level.

As all current information and prevailing expectations are priced into the values of assets, any events that cause the expectations to be altered, will have an impact on asset prices. This holds true even if one would not believe that market is 100% efficient as it does not be so accurate for prices to swing when something unexpected happens.

While the stimulus bill was highly expected and hardly surprising (not as the Suez canal blockage or the Archegos blow-up), there remained a degree of uncertainty if the bill would not have been passed in either the Senate or the House of Representatives. Getting rid of uncertainty is also considered new information, which could be reflected in the asset prices the next day.

With all of this in mind, and especially in the light that I do not believe that these were the last significant events to occur in 2021, I remain very pleased with my current investment strategy and the All Seasons Portfolio. Right now, it is very hard to make any predictions for the rest of the year and for the remainder of the pandemic, so it is much better to remain diversified and balancing the portfolio risk to all possible outcomes.

It is thus important that you have a portfolio which actually balances the risk exposure to different environments. If you have not already built your own All Seasons Portfolio to really diversify your portfolio and balance your risk, I strongly suggest that you begin preparing for whatever market environment that may come as soon as possible, to better manage the risk and volatility in your portfolio, while still not forfeiting return. If you need inspiration, check out my post on How to get started with the All Seasons Portfolio strategy or check out some example portfolios.

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March 2021 Portfolio Update

Now then, let us have a closer look at my portfolio for the past month.

Since the February 2021 update, there has been no activity in my portfolio, as I have not added any funds nor executed any transactions.

This means that I have also kept my bond allocation intact since last month. I have learned that many of you are concerned how to treat the bond allocation these days considering the devaluation of most western world currencies and the zero/negative interest rate policies.

A recent article by Ray Dalio on LinkedIn, with the title “Why in the World Would You Own Bonds When Bond Markets Offer Ridiculously Low Yields“, has opened the eyes of many investors, and these past few weeks, I have already held several bilateral discussion on this topic with several readers.

What should you do about it? Bridgewater Associates, published a great piece already last summer about diversification to Chinese bonds, as well as a risk-balanced mix of gold and inflation-linked bonds, as there is limited remaining upside of bonds but potentially unlimited downside.

I am yet to ultimately decide what I shall do about my bond holdings, but will keep looking into this part of my portfolio. Especially if we would soon encounter a sudden and sharp drop in yields, I think that is the last chance to make this change, as I do not see the Fed lowering rates significantly lower than -1%. If they do, we are already in a very dangerous territory where US asset may not be the best protection anyway.

I hope to find the time to write a more elaborate post on this topic, and in the meantime, if you have tips for any resources on this topic, please feel free to share them, as I am looking for more knowledge on this topic. I am also sure that other readers are as well, so let us make a joint effort to become better equipped to tackle this environment in the comment section!

Last month, I published a poll asking you how you had treated your bond allocation so far. I recognize that you may have thought about this topic a lot more since then but at that time, a great share of respondees (42%) had not made any changes to the bond allocations, while 21% had bought more bonds, 14% had scaled back a bit and 14% had diversified their bond holdings. Only 7% stated that they had sold most of their bonds.

What about my All Seasons Portfolio? No material changes since last month, and I remain underweight in Long-Term Government Bonds, while I have diversified my holding here to also include European bonds rather than only US Treasury bonds.

The inflation play is still active, with a higher allocation to gold and commodities, which I am very comfortable with, thanks to the passed American stimulus package, as well as supply chain disruptions.

I have a bit more crypto than I would have wished for, but there is little I can do about this right now, as there are certain limitations to the ETCs I am trading for BTC exposure. DEGIRO har a temporary limitations to buy more of these ETCs, and due to the unit size of the ETC I hold, I cannot sell anymore (only 1 unit is remaining). Thus, I am standing between having too much crypto or nothing at all, and currently, I am enjoying being part of the ride. I am looking for alternative exchange traded products that can give me a better access here, and hopefully such ETPs are available on DEGIRO.

If you are looking to invest in Bitcoin or other cryptocurrencies directly instead of exchange-traded certificates, consider using Coinbase – the most trusted cryptocurrency exchange with more than 43 million registered users, where you can securely trade more than 30 different cryptocurrencies directly in your own wallet.

The last 12-month performance of my portfolio has been in line with my expectations, as you can see in the below data to the right. 10% annual return of an unlevered risk parity portfolio is exactly according to plan, and at less than half the volatility of the S&P 500.

The return of stocks looks incredible, but here you have the base effect to consider, as by end of March 2020, the S&P 500 was near its lowest point amidst the Covid shock. Hence, I am not particularly worried of lagging the S&P 500 at this time, when this is viewed with sober eyes.

Most importantly, I am beating a traditional 60/40 portfolio, which I believe is a better baseline for a risk parity portfolio and what you are really competing against. Considering the low interest rate environment, I believe we will continue to outperform the 60/40 going forward as well.

As for the splits in assets the past 3 months, there is not much to say I believe. It is mainly an illustration of that I have not made any contributions since end of February.

The main contributors to the strong performance this past month for my portfolio and YT has still been Bitcoin, just as last month. Commodities had a slightly weaker month as it has entered consolidation territory after a great start of the year.

Over a rolling 3 month period, Bitcoin and commodities remain the strongest performers, but lately also stocks have been catching up after the decent development in March.

With the low implied volatility, the VIX ETF remains a weak performer, followed by government bonds.

Speaking of governments bonds, US Treasuries saw the worst quarter in Q1/2021 since the 1980s, which adds fuel to the flames that bonds are not in their prime currently.

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

ETFNameAsset Class2021-02-282021-03-31Change
IUS5iShares Gl Infl Lnk Govt Bd UCITS ETF USD AccTIPS€589.00€605.602.82%
DTLEiShares $ Treasury Bd 20+yr UCITS ETF EUR Hgd DistLong-Term Government Bonds€791.56€766.92-3.11%
IGLEiShares Global Govt Bond UCITS ETF EUR Hedged DistLong-Term Government Bonds€633.39€633.390.00%
M9SAMarket Access Rogers Int Com Index UCITS ETFCommodities€409.86€409.40-0.11%
VGWLVanguard FTSE All-World UCITS ETF USD DisStocks€1,355.70€1,417.054.53%
VOOLLyxor S&P 500 VIX Futures Enhcd Roll UCITS ETF C-EVIX€142.97€124.41-12.98%
Added cash€0.000

Thank you yet again for following this blog, and 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 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!

Remember also to check out the Resources page which I will be filling up with useful tools and resources for managing an All Seasons Portfolio. If you have any suggestions for any particular spreadsheet or tool that you are after, let me know in the comments below and I will see what I can do to have it included.

I have also set up a Patreon site, to cover hosting costs, which reach a couple hundred euros annually. If you find any content here at all useful and feel that you can treat me for the equivalent of an espresso, read more about what this means on the Support page here on the website. My annual hosting bill for running the website is around EUR 140, so any support is extremely helpful, as the monetization of this blog is very limited.

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

Book tip: Adaptive Asset Allocation by Adam Butler, Michael Philbrick and Rodrigo Gordillo

In the last article I posted, I recommended three great books for better understanding risk parity investing. As a comment, a reader gave me a great tip for another useful book on the same topic, namely Adaptive Asset Allocation. Naturally, I immediately placed an order and received it last week.

Having only had time to come about half-way so far, what I can say already now is that it is very much worth the read. I find it easy to digest (chapters are short and concise, as well as easily understandable) and thought-provoking with good insights on how an investor should approach portfolio construction.

The authors are the guys behind ReSolve Asset Management, which is one of the few firms offering risk parity funds, such as the ReSolve Adaptive Asset Allocation ETF. They also publish a great variety of useful research on the area, which I recommend you to read as well – all available for free on ReSolve’s website.

By reading Adaptive Asset Allocation, you will learn how to build an agile, responsive portfolio with a new approach to global asset allocation

Adaptive Asset Allocation is a no-nonsense how-to guide for dynamic portfolio management. Written by the team behind ReSolve Asset Management, this book walks you through a uniquely objective and unbiased investment philosophy and provides clear guidelines for execution. From foundational concepts and timing to forecasting and portfolio optimization, this book shares insightful perspective on portfolio adaptation that can improve any investment strategy. Accessible explanations of both classical and contemporary research support the methodologies presented, bolstered by the authors’ own capstone case study showing the direct impact of this approach on the individual investor.

Financial advisors are competing in an increasingly commoditized environment, with the added burden of two substantial bear markets in the last 15 years. This book presents a framework that addresses the major challenges both advisors and investors face, emphasizing the importance of an agile, globally-diversified portfolio.

  • Drill down to the most important concepts in wealth management
  • Optimize portfolio performance with careful timing of savings and withdrawals
  • Forecast returns 80% more accurately than assuming long-term averages
  • Adopt an investment framework for stability, growth, and maximum income

An optimized portfolio must be structured in a way that allows quick response to changes in asset class risks and relationships, and the flexibility to continually adapt to market changes. To execute such an ambitious strategy, it is essential to have a strong grasp of foundational wealth management concepts, a reliable system of forecasting, and a clear understanding of the merits of individual investment methods. Adaptive Asset Allocation provides critical background information alongside a streamlined framework for improving portfolio performance.

Or check out other great books on the topic on the Book recommendation page.

Buy it today on Amazon (affiliate link):

Buy it on

This Post Has 3 Comments

  1. Louis

    Hi Nicholas,

    Thank for this monthly update.

    Coming back to the bonds issue, indeed, a lot of specialists (like Ray Dalio) advice to buy Chinese Government bonds instead of Treasuries.
    But buying Chinese debt means to lend your money to a communist government that does not respect human rights.
    Yes, interest rates are higher in China that in US or in Europe. But is it a good idea to buy those bonds???

    I don’t know if people are aware of what happened with Russian bonds at the beginning of the 20th century.
    If not, I suggest to read this Wikipedia article:

    Personally, I don’t really trust Chinese Government. Do you?

    1. Nicholas

      Hi Louis,
      Thanks for the kind words and for your continuous support!
      I agree with you that there remains a big portion of political risk in investing in Chinese bonds. I agree with Dalio that China is a growing superpower challenging the US as the world’s leading nation, which is detailed in his series “The Changing World Order“. China is in a promising state in terms of economic growth, rising consumer wealth and increase in education. However, it still lags many developed economies in terms of quality of education and industrial output, and a huge part of the wealth of the Chinese middle class can be attributed to the growth in real estate valuations due to inefficient privatization.
      It does not stay there either. While it is hugely beneficial for an economy to be able to set 5-, 20-, and 50-year plans, that is only possible due to the Achilles heel of the economy: its communist regime. Even though China’s economy has a great touch of free market elements in its economy, it has lately become increasingly clear that the economy to a large extent is still governed by the sentiments in Beijing. The stopped IPO of ANT Group this fall was a clear demonstration of power from Xi Jinping against Jack Ma of who is actually in charge.
      Not only was that a demonstration against Chinese companies, but also to the rest of the world that political risk remains an important factor when investing in China. If the Chinese government has no problems with stepping in and meddling with IPOs and the financial markets, what guarantees are there that there will be no expropriations of foreign-owned Chinese government bonds?
      We do not even need to go as far back as the Russian revolution to find precedents (personally, I do not see it as a possibility that a revolution will overthrow the communist regime any time soon). Instead, the Argentinian sovereign debt default of 2001 is a more recent example of when a government mistreats foreign creditors, albeit in this case, the mistreatment was a just a part of an ongoing default situation during an already challenging state of the Argentinian economy.
      So if even more democratic nations have mistreated foreign creditors, why wouldn’t a communistic regime, who will do whatever it takes to remain in power, not do the same?
      The question of whether to invest in Chinese bonds is, however, not clear. Sure, there is a lot of political risk in China, but the question is, is the environment and the risk in the US so much better? Per Dalio’s analysis, the US is a superpower at the very late stages of its long-term cycle, with a new world order being imminent with the rise of another power (China). The current monetary and fiscal policy of the US is not healthy, and will end in that whether the US economy breaks or that the US Dollar breaks, or both. None of these scenarios are good for an investor who holds American notes. Plague or cholera?
      This is not a simple issue; otherwise we would not be having this discussion. The fact is that the American flirting with MMT is dangerous, and at the same time, China poses great political risk as the regime is not acting responsibly nor in a way that gives bond investors comfort. See for example how China treats poorer nations as part of OBOR with expropriation when the countries default on loans taken from China to cover infrastructure investments (Montenegro most recently, who have now pleaded to the EU for help).
      Right now, I find it difficult to convince myself to switch all my bond holdings to Chinese debt. At most, I would diversify, and follow the continuing development in both US and China. The problem is that this question of in whose bonds to invest, is at the margin of a bigger clash between these two behemoths as their relationship is deteriorating and tension keeps building. In such case, Chinese debt is a hedge against the outcome that China replaces the US as the world’s dominant power.
      Long response, but hopefully there are some nuggets of valuable thoughts that can be extracted.

  2. Louis

    Hi Nicholas,

    Thank you for your (long) response!
    Fully agree with your conclusions.

    At the end, investing in a global government bonds ETF (as you did) could be a good solution to minimize the risk.

    In my process, I don’t change anything in my permanent portfolio, excepted at the yearly rebalancing (which happens on January 1st each year). So for the moment, I keep my Treasuries bonds ETFs.
    I still have 8 months to think about it…

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