Outlook for February 2018

Seems like the year 2018 just started, and we are already in February?! Time sure is aflyin’. Time to look at what the markets are doing and present my outlook for February 2018. Things seem to be getting interesting now. The stock market has continued its climb with some great returns just in the first 30 days. However, the last few days saw some bloodletting that was interesting to note.

As I mentioned in my Outlook for 2018 post, the US$ will be the most interesting asset to observe in the investing universe. The moves are already pretty apparent as the slide has accelerated during the first month of the year. The US budget deficits are getting more media attention, the US government saw a brief shutdown — only to kick the can down the road for a short while, interest rates are rising while the currency is sliding — the US market is behaving like an emerging market!! These are interesting times, no doubt. I will be keeping a very close eye on the US$ and continue to position myself to protect my purchasing power as the world’s reserve currency continues down the devaluation path.

Outlook for February 2018

With the slide of US$, we can expect to see asset prices starting to inflate. Assets such as stocks have already been inflated over the years, but there are still some laggards – i.e., commodities. The following chart has been shared by plenty of folks in the past, but Jeff Gundlach just re-presented this calling it the Chart-of-the-Year, showing that commodities haven’t been this cheap relative to other financial assets.

While some commodities, esp base metals have had a stellar year in 2017, others such as precious metals have lagged. I expect precious metals to start rallying sooner or later as inflation takes hold, so I am happy to sit on my portfolio of gold and silver miners that will see tremendous tailwinds when their underlying asset prices increase.

While my overall portfolio is overweight in Basic Materials sector, I am looking elsewhere to deploy cash. The other related fields that I find interesting and provide opportunity include Energy, REITs, and the cryptoasset market. In addition, I will be looking to make a few moves to align my portfolio as outlined in my Goals for 2018.

As of Jan-31-2018, our overall portfolio diversification is structured as shown below.

Looking for investment ideas? Check out this Top Investment Picks for 2018, where 35+ bloggers present their top pick and a reason to invest in those securities.

What are your thoughts on the points mentioned above? Do you have any specific thoughts on the markets and looking at anything interesting? Share with a comment below.

Full Disclosure: Our full list of holdings is available here.

10 thoughts on “Outlook for February 2018

  1. R2R, I agree that inflation is likely to be a factor in coming months. Your portfolio is certainly set to benefit. I don’t mind a little inflation and higher interest rates since I’m a lender, not a borrower. As long as inflation and rates increase at a measured pace, it should not be too disruptive to real growth. Tom

    • Bring that inflation on 🙂 My portfolio is ready to participate and preserve my purchasing power….Will be interesting to see how things progress. Today’s slide could be the start of something big.

      R2R

  2. Interesting to hear you say you think REIT’s provide a good opportunity as most people are saying the opposite due to possible more rate hikes. (Personally I think there is still some good value in some Reit’s as well).

    Curious what your thoughts are on Caledonia Mining (it’s been on of my favorite stocks for a while now – and although I had sold it a while back – i’ve been looking to get back in). Also pays a div in USD.

    Cheers!

    • Yeah REITs can be tricky — with interest rates rising, the risk-free return is higher, but at the same time, due to the coming devaluation of US$ (and other countries will fight back in the race to the bottom), real assets are what I am looking to invest in, in order to preserve the purchasing power. By real assets here, I mean things like commodities, real estate, infrastructure exposure etc.

      I havent really followed Caledonia mining — so cant comment on it.

      Cheers
      R2R

    • Precious metals have entered a bull market, but there is lots of upside….when the time comes, there will be some major repricing of gold and silver. No one really knows when, but good to have some holdings in the portfolio and play the waiting game.

      R2R

  3. The prophet….. man seems like all your calls are right on these days. You bought that dope stock cannimed? and bam 2 days later them and aurora? Merge….. you sell cnr and then its pulls back under 100 bucks. You post this and we get one of the biggest selloffs in a long time…… how does one know so much? Haha

    Heres hoping your right about precious metals i want to sell some of my physical position!

    Cough* i did say on the picks for 2018 – tahoe resources is my pick as i believe cryptos and dope stocks might pullback and the market will follow pumping up precious metals*

    The year is young, but your insight has been spot on road!
    Keep it up

    • Haha you are too kind, PCI. I am simply listening to some smart people and paying attention to some of the market signals that seem pretty obvious. The CMED and ACB wasnt me — perhaps you are confusing me with someone else. But yes, CNR I did sell at a good price ($105). The valuation just doesnt make any sense whatsoever — I want the stock price to be way down before I would consider buying.

      The two spots where momentum was abound — weed and crypto sure have taken a beating lately…will be interesting to see where the money goes if theres a rotation. Most of the stocks I own, I knew that I would be holding through the down cycles, so I am not too concerned about trying to time the market and making a profit. All the best with Tahoe — as you said, the year is young and plenty more action left.

      R2R

  4. JC says:

    I don’t blame you at all. I’ve been wanting to get some more exposure to the commodity sector because they seem like they’re just ready to really take off. If inflation does start to pick up, as many have been expecting, then gold, silver and oil will be solid places to be invested. I think we’re in a pretty interesting time for the markets, both stocks and bonds, and the economy overall. If the end of January was a foreshadowing of what’s to come then the rest of the year could be a lot more exciting than 2017.

    • Commodities should see some good returns if we enter a inflationary environment, while maintaining some good growth … but who knows how the global economy will do. China’s slowdown in growth and shift in policy changes after the 19th Congress meeting could mean that commodity growth may not come as expected. We’ll have to see how things play out. Its a sector that could potentially rally and bring strong returns, hence the big exposure in my portfolio.

      Best
      R2R

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