It's time to plot our comeback - Part 3
Musings: Enough of lamenting our losses. I am charting an action plan.
In Part 1 of this series, I discussed the need to plot a comeback plan that will help my portfolio recover it’s losses as quickly as possible if and when the market turns back up in a meaningful way. I don’t know if this will happen, however I want my portfolio to be ready just in case.
In Part 2, I laid out what I was seeing at the 100,000 foot level (global macro) and the 10,000 foot level (markets and sectors).
As I continue my research and writings, some things I need to remind myself:
Some of my favorite companies might not be the best holdings for 2022-2023 and I may need to sell or trim them, if that’s the best medicine for my portfolio.
All my forecasts (see quarterly map below) may not come to fruition. I am not a fortune-teller and I don't have a crystal ball.
This roadmap will be a living strategy that needs to be updated every quarter as time proceeds and events unfold.
I still believe that I have time (months) to execute any major changes to my portfolio. We might get a short term bounce here and there. I plan to raise cash into any strength.
No one can predict future black swan events, by their very nature, and these could upend the best laid plans.
I took a crack at laying out what I believe could happen in each of the upcoming quarters. See the map below. This is where the science of financial data meets the art of investing forecasting. All or some of these might never come to fruition.
However, I am not willing to sit on my hands waiting for the market to give me lagging signals. I would like to be able to react quickly as things play out and having such a roadmap with possible action items is my preferred approach.
I highlighted a few economic and sector trends that I find instructive:
Corporate share buybacks are strong in Q2 and will continue through Q3.
Labor markets are topping off. Job openings are slowing down. Layoffs are trickling in. A new balance is in the making over the next 12 months.
The US$ (DXY) will stay elevated until the FOMC stops raising rates and other central banks have to continue hiking their rates to tackle higher local inflation e.g. EU, UK, Japan.
COVID lockdowns become a thing of the past by end-2022. Countries cannot afford them any more...not even China.
Energy will stay elevated for a while due to supply-demand imbalances.
Other commodities could bottom out in Q4 2022 as we experience a global slow down of sorts.
Real estate is showing signs of rolling over and a downward trend will develop through the end of 2022, leading into the traditionally slow Winter season.
Consumer sentiment will stay depressed through the next 2-3 quarters and perhaps spending will pick up a bit for the Holiday season.
Next, I will start to lay out some portfolio level changes (larger) and tweaks (smaller) that I plan to make to my portfolio. This part of the exercise will take time to fully crystallize because I want to get through Q1 earnings for all my holdings such as CRWD, NVDA and SNOW. I definitely need to understand their forward guidance as I decide where to add or cut.
Lets keep this discussion going…drop a comment below if you see things differently or if I am missing anything in this exercise.