Market / sector direction thoughts

Salam just thought I’d offer some comments on market and sector direction thoughts. These are just my thoughts and it’s really really hard to be consistently right. The only way I use these thoughts is to tilt/weight my portfolio in a particular direction which I will explain below.

Would love to hear others’ thoughts.

So Bismillah, here goes:

  1. The banking crisis I don’t think is properly reflected in equity markets. I am concerned about a market (S&P500) correction in the next 6 month window. Why? Because there is likely to be a tightening of lending criteria, which means less cash rolling around.
  2. I don’t think it is a proper crash, I think up to say 20%.
  3. But then the Fed will probably start printing again, so might cause a market rally. But that causes inflation which might temper the rally.
  4. Fed would also reduce interest rate.

So what am I doing/thinking:

  1. I need to have strong hands to deal with the volatility. So if a stock drops 20% even if nothing happened to the stock, I need to feel emotionally ok to hold it.
  2. Holding a higher allocation to cash than normal makes sense. Something between 30-50% makes sense to me personally.
  3. Logically, sukuk (e.g. SPSK (USA) or Franklin Sukuk (UK)) should logically do well. Because as interest rates decline, sukuk should go up all else being equal. So taking a position there makes sense.
  4. Staying away from the sort of things that get smashed in a market correction makes sense, e.g. smaller cap, loss-making growth stocks, crypto.
  5. Gold logically makes sense to do well in this environment. Not because of the banking crisis, as the system will survive this year, more because of things like the way the US govt have dealt with Russia. I haven’t taken a position. It might drop (with the market correction) before it goes up.

Anyway those are my thoughts…would love to hear others’ own opinions, or views on what I’ve said.

Ignore what is impossible to predict yet possible to guess about & find a stock that will generate substantially higher cashflows in 3 to 5 years and buy at a reasonable price. If you emotions guide you and market sentiment rings in your ears, average in your position over the next 12 months.

Yeah you’re right. I suppose I just got lucky when I publicly

  1. Exited a Bitcoin miner pretty much at the top of the BTC price in 2021
  2. Went very long energy last year then exiting before the recent drop off
  3. Held a high cash allocation last year through the volatility

Just dumb emotional luck! :rofl:

What % of your assets are invested in your strategy?

Is your strategy AUM over $100k or $1MM

is the strategy proven out over 5 years, and what is the Sharpe Ratio?

If you have run $100k or $1MM+ for 5 years with a Sharpe Ratio of 1.5 then bravo, if not, let’s give it some time before coming to a conclusion.

Alhamdullilah let’s agree that one needs to prove oneself for longer before making any conclusions. I think this aligns with in my original post “These are just my thoughts and it’s really really hard to be consistently right. The only way I use these thoughts is to tilt/weight my portfolio in a particular direction.”

When you start allocating capital to fund managers let me know and I’ll answer your survey!

But before that, let’s shut down the S&P500 index (and every other index) and probably 99% of hedge funds for failing your sharpe ratio test over the past 5 years lol.

Bottom line - let’s just relax - there are no rocket emojis on my posts, I get no benefit if someone decides to buy sukuk or gold or stay in cash…it’s just a friendly discussion which aligns with my perspective that sometimes market/sector direction is sufficiently predictable as to affect portfolio weightings. But like you rightly say, time will tell if my perspective is right for me.

Also instead of throwing stones at people, maybe share some of your knowledge about stocks you like.

We can do a friendly competition - my portfolio (on my other thread) versus yours - I’ll even buy you a halal chicken burger meal when you win. I would eat with you, but you’re across the pond so that might be tricky, although I do want to head over to Toronto as I have relatives there so that might be a little nearer.

Start May the 1st (or even May the 4th if you’re a Star Wars fan)?!

Actually that is my 9 year Sharpe Ratio, not 5.

Great mA. Do you have a social media presence on YouTube, LinkedIn, Twitter etc.? A substack newsletter maybe?

If not, if you want to generate leads for your business then I’ve seen people do it that way?

And/or we can do a version of $1m “Buffet bet” that you can’t beat the market, in a halal way of course. We can see if we can beat SPUS over the next 5 years or something.

No change in view from what I said a month ago.

Interestingly, market continues to go up…but it seems to be the biggest stocks only going up. Same thing happened last year. i.e. breadth is falling.

Let’s see.

1 Like