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Weekly Update 3 December 2024

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This content is provided for information purposes only. It is not a recommendation to buy, sell or hold any security.

Bank of America last week published its 2025 market outlook.
longportapp.com/en/news/221114141

The bank recommends staying long US stocks until Q1 25, but rotating into European stocks and emerging market currencies in Q2.

In Q1, BofA expects the US economy to stay strong. The US dollar may appreciate and US small cap stocks may do well. Economies outside the US, by contrast, will remain weak, putting pressure on international stocks and currencies.

The bank expects a reversal in Q2. By then, US inflation will increase and the Federal Reserve will turn hawkish, whereas in the rest of the world governments and central banks will stimulate. Falling oil prices and a resolution to the war in Ukraine may also help international stocks.

Overall, the bank predicts positive 5-10% returns for global stocks in 2025.

I believe this is a reasonable scenario. There has to be a catalyst for relative performance to improve outside the US, and logically that catalyst would be a more hawkish Federal Reserve.

I am not going to chase US stocks in Q1, but have positioned the portfolio to benefit from lower interest rates in Europe. The European economy remains weak, so I have reduced the share of banks and other cyclical companies in the portfolio. The French budget situation adds an extra layer of risk for French stocks.

The risk with this positioning is that Trumpโ€™s policies lead to higher interest rates globally. Most investors seem to believe that a Trump presidency means higher rates, but it is possible to argue that rates should fall instead.
stenoresearch.com/steno-signals-128-i-thought-trump-and-tariffs-were-supposed-to-lead-to-a-bond-riot/

I would like to increase the share of risky cyclical companies in the portfolio. After all, it is from improvements in the economic outlook that the greatest amounts of money have historically been made with this strategy. But I donโ€™t have confidence in any improvement yet, and it may be that we will have to wait until Q2 25 like Bank of America suggests to see it.

๐Ÿฎ๐Ÿฌ๐Ÿฎ๐Ÿฐ ๐—ฝ๐—ฒ๐—ฟ๐—ณ๐—ผ๐—ฟ๐—บ๐—ฎ๐—ป๐—ฐ๐—ฒ
@triangulacapital +29.5%
SWDA.L +21.9%

๐—ฃ๐—ผ๐—ฟ๐˜๐—ณ๐—ผ๐—น๐—ถ๐—ผ ๐—ฐ๐—ต๐—ฎ๐—ป๐—ด๐—ฒ๐˜€
BNP, Eiffage and Vinci were sold. Anheuser Busch and British Land were bought.

Copy Trading does not amount to investment advice. The value of your investments may go up or down. Your capital is at risk. Past performance is not an indication of future results.

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Please refer to important disclosures.

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ยฉ Pietari Laurila 2024 | All rights reserved.

Disclosures

eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFD assets.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 51% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

eToro (Europe) Ltd., a Financial Services Company authorised and regulated by the Cyprus Securities Exchange Commission (CySEC) under the license # 109/10.

eToro (UK) Ltd. is authorised and regulated by the Financial Conduct Authority (FCA) under the license FRN 583263.

Your capital is at risk. Other fees may apply. For more information, visit etoro.com/trading/fees.

Pietari Laurila is not a registered investment advisor and does not offer investment advisory, fund management or wealth management services.

Triangula Capital is a brand name, not an incorporated entity.

This page is provided for information purposes only. It is not a recommendation to copy the Triangula Capital strategy or to buy, sell or hold any security.

2009-2020 performance figures are from Pietari’s personal Interactive Brokers account. They are time-weighted returns calculated in accordance with the Global Investment Performance Standards (GIPS).

From 2021, performance is calculated by eToro.

Past performance is not indicative of future results.

Track Record

It is often said that past performance is not a guarantee of future performance.

That is true. But there is also some evidence indicating that portfolios that performed better in the past, do perform better in the future.

“[…] top-decile prior-alpha funds produce annual future alphas of about 150 bps, net of fees”ย Source

Risk warning: That is only one study. In general, past performance is not indicative of future results.

Aligned Incentives

Pietari invests the majority of his net worth in the strategy. This ensures that his interests are aligned with investors who copy the strategy.

“Funds with high-incentive contracts deliver higher risk-adjusted return, and the superior performance remains persistent. The top incentive quintile of funds outperforms the bottom quintile by 2.70% per year” Source

Risk warning: Pietari holds accounts with multiple brokers and may therefore have a conflict of interest when deciding which accounts he should trade in first.

Unconstrained Investments

The strategy has fewer constraints on its investments than traditional mutual funds.

The strategy portfolio can be invested in stocks, bonds or cash and these allocations can vary over time.

Compared to traditional mutual funds, the strategy also:

  • holds fewer securities
  • trades more
  • avoids following the index

Each of these points has been shown to be an important predictor of portfolio performance.

“We […] find that portfolio concentration is directly related to risk-adjusted returns for institutional investors worldwide” Source

“A one-standard-deviation increase in turnover is associated with a 0.65% per year increase in performance for the typical fund” Source

“We find that truly active funds significantly outperform closet indexers. Further, we find that the truly active funds are able to outperform their benchmarks on average by 1.04% per year” Source

Risk warning: Concentrated portfolios with few positions can suffer large losses if bad news arrives about any of the companies in the portfolio.

Cheap Stocks in Cheap Sectors

The strategy invests in geographies and sectors where values have collapsed due to macroeconomic problems.

Within these geographies and sectors, the strategy overweights stocks that trade at low valuations on measures such as price-to-earnings or price-to-net asset value.

Every stock in the strategy portfolio must also be a good company, with no obvious red flags or long-term threats to its business model.

The aim of the strategy is to maximize returns, even if this means taking more risks than usual.

Risk warning: The strategy portfolio tends to be concentrated in risky stocks, which means that its losses in any market downturn will likely exceed those of the market index.