Our portfolio is hovering close to its all-time high. But in my view, it’s far from a good time to sell because:
1. Investors are rather pessimistic about the economy.
Historically, good times to lighten up on stocks occurred when investors were optimistic, such as in 2007, 2017 and 2021.
Conversely, good times to buy arrived during times of investor pessimism, such as in 2009, 2011-2012 and 2020.
2. The OECD leading indicator says the economy is strengthening. Stock crashes have almost always occurred during times when this indicator is weakening.
3. We are in a seasonally strong period of the year.
4. Investor positioning is neutral.
5. Bank stocks are very cheap relative to their historical averages.
2023 has been a good year, but my thesis about banks has not yet played out. Should bank stocks return to their average valuations, significant further upside would be available from the portfolio.
Bradesco was sold, BNP Paribas bought.