There are many good reasons to be cautious on the stock market for the rest of the year.
Bank lending is declining, credit availability is tightening, and leading indicators points to economic weakness ahead. Yet earnings estimates have hardly fallen, the market is up +9% for the year, and valuations remain high.
But is the above view all too pessimistic?
Investor positioning is relatively light, financial conditions have recently eased, and bank earnings published Friday surprised positively. Forward-looking indicators point to a possible positive inflection point in economic data in the coming months.
This is certainly a confusing environment. We do not have a strong view as to what will happen, so the portfolio contains a mixture of positions: some that benefit from higher uncertainty (precious metal miners), some from a weaker economy (healthcare) and some from an improving economy (banks, oil).
Overall, the portfolio has a slightly bullish tilt to it because of the positive April seasonality discussed last week. Perhaps, if the market rallies further on hopes for an economic soft landing, that will create an opportunity to take some risk off the table and move into a more defensive posture.
Enel and T-Mobile US were sold. ASR Nederland and MAG Silver were bought.