Sharing My Long-Term Portfolio
Investors,
If you missed yesterday’s report, you might not realize that the stock market is trading at all-time highs. Contrary to what the headlines want you to believe, equities have been the place place to preserve capital over the past 18 months. Don’t believe me?
Read it here:
Yesterday’s report was focused on blending the macroeconomic situation with the equity market, but there was one chart that I saved for today’s edition of Cubic Analytics: the S&P 500 relative to the money supply (SPX/M2).
When adjusted for the money supply of the U.S. economy, we can see that stocks haven’t made any major progress relative to their pre-Financial Crisis peak, while the S&P 500 itself has gained +180% since the pre-GFC peak. Over the past 15 years, we’ve seen major rejections occur in this red zone:
Housing Bubble / GFC
COVID Crash
Fed Tightening
While I’m not necessarily predicting that stocks experience another major crash from this range, it’s more so interesting to acknowledge the argument that stock prices, on the aggregate, have merely kept up with the growth of the money supply. This is a point that I’ve raised for several years and it’s one of the key reasons why I remain such a long-term optimist for asset prices — the Federal Reserve will continue to debase the U.S. dollar over the long run by conducting QE & ZIRP, which will likely fuel more asset price inflation in the decades ahead.
M2 isn’t a perfect metric and has many flaws in today’s modern economy, but it’s the most widely-accepted method of evaluating the money supply. Given that asset prices are quoted in USD terms, meaning that USD is the denominator of the exchange rate of the stock market (SPX/USD), a lower value of USD from debasement simply means that the output of SPX/USD rises. It’s simple math.
In today’s newsletter, I’ll be providing a very unique snapshot of how I’m managing long-term portfolios by sharing the exact positions I’m holding. I had previously shared the “Portfolio Strategy” series in Q3 & Q4 2022, where I outlined the investment thesis behind 15 core portfolio holdings in long-term accounts; however, I’ve expanded onto that list and have taken positions in a variety of new stocks that I’ll be sharing in this report.
More specifically, I’ll be sharing how large my cash position is vs. where it was at the start of the year and how the portfolio is still defensively positioned based on asset class allocations. I will cover how I’ve strategically designed the portfolio to build a solid foundation in order to justify buying growth-oriented stocks more recently at a very patient pace. Hopefully, this will provide investors with a blueprint for how I’ve navigated the market this year and how I view long-term portfolio allocation decisions. I’ll discuss my mistakes as well, highlighting how I can improve in the future.
Moving on, I’ll also be sharing S&P 500 internal metrics that have allowed me to shift into a more defensive stance over the past 3 weeks, which I have communicated to premium members in these reports.
I was also going to share potential crypto trade setups in this report, but ongoing market dynamics are forcing me to acknowledge short-term headwinds that are present in the market. I’ll be explaining all of those dynamics in this report and highlight how traders and investors can be navigating this environment in a prudent manner.
Let’s dive straight in.