Hormuz Is Running the Market
Oil, rates, and risk assets now depend on what happens next between the US and Iran
MACRO
Photo by Alexander K on Unsplash
We are again hostage to the Iran/US conflict. The longer it goes on, the worse it is for oil prices and inflation, and therefore for interest rates, credit availability, and risk assets.
The overall environment remains supportive of stocks, as credit is still available and earnings growth is accelerating. Yet a prolonged conflict and a closed Strait of Hormuz could really damage this scenario.
So this is a time to stay defensive and be ready for both outcomes. A resolution would likely restart the bull market, while more bombs and a closed Hormuz would keep pushing growth stocks and risk assets lower.
This is my (bifurcated) base case.
INDEX
Most of the damage has been happening on the tech side. The NASDAQ was down more than 2% for the week. Not a great-looking chart.
If nothing changes in the Middle East, I expect tech to keep losing ground.
SECTORS
Energy is front and center again, but the trade is tied to the Strait of Hormuz remaining closed. If you knew it would stay closed for several more weeks, it would probably be a good trade. I don’t know what is going to happen.
Healthcare and biotech look good here, as they are less exposed to Hormuz and the consumer.
Financials have also been doing well in an environment of rising interest rates. For how long? I don’t know. Hormuz will tell us.
Cyclicals continue to look very weak. This reflects a bifurcated economy: corporate America looks strong, while the average consumer is not in the healthiest position when it comes to disposable income.
PORTFOLIOS
10X MOMENTUM PORTFOLIO
Last week, my XERS buy-stop order was triggered. The previous week, my stop-loss order for CRDO was also triggered for an 8.5% loss.
The portfolio is now updated below.
I have four open positions. The portfolio is up 227% since inception, with a 43% annualized return.
I am not buying anything this week, as I did not find anything really compelling on my watchlist. I prefer not to force a trade.
Below is the full scorecard for my 10X Momentum Portfolio.
10X BEST OF ARKK PORTFOLIO
After last week’s rebalancing, I wanted to share what the portfolio now looks like.
I need to apologize, as I made a mistake. Last week, I sold MELI, TOST, RKLB, RXRX, and CRWD. I then added URGN, SPOT, NTLA, JOBY, and GENI.
I said that I had “kept” GENI, but GENI was actually a new addition to the portfolio, as it was not part of the previous portfolio.
Below is what the current portfolio looks like. The next rebalancing will be in mid-October, when the portfolio turns two years old.
The full updated scorecard is also below.
It shows a 147% return since inception and a 66% annualized return. It is beating the ARKK Fund by a very wide margin: 95 percentage points above ARKK’s 52% return over the same period.
So far, my methodology shows a clear edge over ARKK.
10X EASY DOUBLES PORTFOLIO
No changes to the portfolio. Below is what it currently looks like.
My stop-loss order on ARDX has not been triggered yet. Zevra had a very bad week.
Despite DELL and LQDA being above the 100% mark, the overall portfolio is still not beating the S&P 500.
I am not buying anything this week.
Below is the watchlist. I added two new companies: Marqeta (MQ) and Chime Financial Inc. (CHYM). Both look very promising.
That’s all for this week. Let’s see what the new week brings.
Not investment advice. Do your own research and consult a licensed advisor before acting. Edited using AI tools.