I hope this month’s update finds you well.
Other than piles upon piles of shockingly bad economic news, not much has changed in my outlook since I last wrote to you… so I will try to keep this monthly update brief.
Current Market Conditions
The market rallied throughout the month of April, which has led many investors to the optimistic conclusion that the worst of the COVID-19-related effects on our economy are behind us.
While I wish that this were true, I think that this conclusion is wrong for investors. Dangerously wrong.
Based on my research, we are still in the early stages of a large, cyclical economic downturn. US GDP continues to rapidly decelerate, inflation has fled, deflationary forces are rampant, unemployed Americans have nearly reached Great Depression levels, supply chains have been ground to a halt, geopolitical tensions are high and rising, most businesses are in a severe earnings recession, etc., etc., etc.
I don’t bring these facts up to scare you. I mention them because the underlying economy in the US and around the world is bad–historically bad–and stocks generally follow the trajectory of the economy over the long-run.
While stocks did perform quite admirably during the month of April, I believe it was nothing more than a standard “bear market bounce.” Statistically-speaking, darker days and continued volatility lie ahead for most stocks… at least in the near-term.
Thankfully, there are alternatives to grow your portfolio other than simply investing in the stock market!
Investment Strategies for Vailshire’s Separately Managed Accounts
When inflation and GDP are decelerating, and volatility is not at extreme levels, the following assets tend to outperform the broader market:
- US Treasurys (short and long duration)
- Cash (the US dollar)
- Gold
- Gold miners and royalty companies
- Consumer staples
- Healthcare
- Utilities
- Real estate
- Bitcoin
Our plan
We have established relatively small positions in some defensive stocks, and have increased our exposure to gold, gold miners/streamers, and bitcoin. I believe that gold and bitcoin will significantly outperform traditional stocks and bonds over the coming 3-5 years… and we are positioning ourselves accordingly.
Currently, our separately managed accounts are allocated in the following moderately defensive manner:
- 15% Defensive US Stocks
- 20% US Bonds
- 5% Real Estate
- 20-40% Cash (earning interest)
- 20% Gold and Gold Streamers/Miners
- 0-20% Bitcoin (based on personal preference and trading permissions)
If you are a Vailshire Client, feel free to log into your Vailshire-managed account(s) at Interactive Brokers and notice how your own portfolios are positioned! (It’s a good idea to log into your accounts occasionally, just to make sure your settings and demographics are up to date.)
Also, if you are not currently holding any bitcoin, but would like to consider doing so going forward (my recommendation), please reach out to me so we can set up your account accordingly and make it happen!
Conclusion
The next several months will be interesting, if not disconcerting. As grim economic data continue to pour in and stocks increase in volatility, we will be prepared to protect what’s ours and actually profit in the midst of tumultuous times.
As described above, we are not only prepared for what lies ahead, but are positioned to grow our portfolios via a wise, diversified selection of “alternative” assets.
I remain optimistic about our future… I hope you do, as well!
Thanks for your continued trust in Vailshire’s systematic investment approach.
Investing wisely with you,
Jeff