High Inflation

Read more about the article eToro Post – How Strategic Rebalancing Helped Avoid a -35% Loss in Long Treasury Bonds

eToro Post – How Strategic Rebalancing Helped Avoid a -35% Loss in Long Treasury Bonds

Since I joined eToro in April last year, I have been sharing insights and observations about investing with risk balanced strategies such as the All Seasons Portfolio (“ASP”) strategy I run here. As eToro is a social trading platform, I from time to time share content in my eToro feed, which I then share on the blog in posts like this.

As part of my All Seasons Portfolio, the asset classes have a set aimed allocation, which is based on their historical volatility and correlations and biases to different economic regimes. For rebalancing the portfolio, I apply rebalancing spans that allow assets to deviate from the aimed allocation with +/- 20%, unless it is in a trend.

Such rebalancing trigger occurred in March 2022 for Long-Term Treasury Bonds, as its weight had fallen by more than 20%, but as it was in a clear negative trend, rebalancing was postponed until May 2022.

By waiting with the rebalancing, I managed to avoid a loss of more than 35% on the position I would have taken in March (or -2.5% on a portfolio level).

In this post, we describe in a bit more detail the benefits of applying such strategic rebalancing rules.

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Read more about the article eToro Post – Delayed Planting Season in the U.S. Threatens Crop Yield

eToro Post – Delayed Planting Season in the U.S. Threatens Crop Yield

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The big news surrounding CBOT traders the past few weeks is the very wet and unusually cool weather this spring in the northern U.S. Plains, affecting farmers in North Dakota, northern Minnesota and parts of South Dakota.

For example, the planting progress for North Dakota corn reached 20% last week, compared to a 66% annual average at the same point in time in previous years, while spring wheat recorded 27% completion versus a 80% average.

The numbers are, in other words, far off from a typical year. The similar grim story is told for soybeans, albeit these are less delayed than wheat and corn on a nation-wide level, but with North Dakota (the fourth largest soy area in the U.S.) being again significantly behind.

The wet conditions have made it difficult to get the crops into the ground, with the U.S. corn planting running at the second-slowest pace in more than a quarter century, and spring wheat planting being THE slowest on record.

In this article, originally posted in my eToro feed, we take a quick look at what consequences can be expected from this late planting of vital crops.

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Read more about the article Portfolio Update – April 2022

Portfolio Update – April 2022

Market update of April 2022 includes a continuing emphasis on interest rate risk on the back of rising inflation, albeit recession fears raise questions of the timing of rate hikes and the impact on the economy. We'll analyze what the indicators tell.

As a result of the current inflationary environment, strongest portfolio performers include commodities, gold and VIX in April, but much of the profits were offset by losses in bonds. Portfolio overall remained stable.

In my strategy, a couple of tweaks have been implemented last month: i) tactical tilt toward inflation-linked bonds from nominal bonds, and ii) introduction of leverage through margin. Read more about these changes in this month's post.

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Read more about the article eToro Post – Different Types of Inflation and Assets That Hedge Against Each

eToro Post – Different Types of Inflation and Assets That Hedge Against Each

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Surely you have not missed the talks about inflation the past year. Even from the Fed and Yellen, the sentiment about inflation has changed from “not a problem” to “transitory” to “longer than first expected” and now to “good for the economy”.

While the price of risk assets, such as stocks, may also inflate due to the rise in inflation, they are not rising as much in real terms.

Rising inflation, and especially inflation that is higher than expected, is harmful to most common portfolios that comprise of stocks, or a combination of the two like the 60/40 Portfolio. Both stock and bonds are assets that perform well in times of low or decreasing inflation, and will lag in times when inflation rises.

It is thus vital to have a portfolio which also includes inflation hedges to mitigate the risk of unexpected inflation prints.

In this post, we will be looking at different types of inflation - as inflation can manifest in different ways - and how you can protect your wealth against each of them with different assets.

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Read more about the article Portfolio Update – February 2022

Portfolio Update – February 2022

This month, I will be trying a slightly changed format for this monthly update post.

Previously, I have combined a deep dive/insights text with an update of my portfolio performance, but I have been considering changing things up a bit.

Instead, I will today be first focusing only on a market update for the past month, together with looking a trends in economic growth and inflation (remember, the four regimes that the All Seasons Portfolio strategy is designed to fend off), before presenting my portfolio update on the back of it.

In February 2022, as well see from the indicators, we remain in an inflationary boom - for now - but it seems like stagflation could be on the horizon as the growth rate is falling.

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Read more about the article eToro Post – Systematic Trading and Strategic Rebalancing of Commodities

eToro Post – Systematic Trading and Strategic Rebalancing of Commodities

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This pot was originally shared on my eToro feed on 13 March 2022. Make sure to follow me there as well, and did you know that you can copy my trading there for free? Create an account today, copy my portfolio by searching for user "Allseasonsport" to automatically duplicate my All Seasons Portfolio strategy effortlessly.

The benefit of a systematic strategy - like the one I run here on eToro - rather than a discretionary strategy is that you don't get in your own way when following rules that are proven to work.

Hence, by taking a trader/person with cognitive biases out of the equation, you increase the probability of success by avoiding mistakes caused by limits of the human brain.

It is intuitively hard to buy assets that are trending, as it feels more expensive by the day when the price goes up, and you tell yourself you will "buy the dip".

The problem is that when that dip occurs, the trend may be broken and the asset is no longer an attractive buy. That is when our cognitive biases hinder us from success.

When we go against rules, we tend to make mistakes, as the rules were set in place for a reason.

Due to these rules, I will be strategically rebalancing Commodities and Long-Term Treasury Bonds in my eToro portfolio as they have exceeded their rebalancing spans. Read more about my reasoning here.

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