Outlook for April 2018

Well, Q1 2018 is in the books and the markets are starting to seem pretty interesting day-by-day. The pillars of the market – the FAANG stocks (before the recent decline, the 5 stocks made ~14% of total US market) are starting to see pressure as the public has started revolting against the platforms socially. Most of all, the Facebook debacle was just a matter of when, not if, when the user’s trust would be broken and everyone woke up to realize what they were signing up to. The users have now started questioning the same for other platforms too, with an increased call to regulation – which will be interesting to see follow.

Some interesting developments over the last week in the oil market occurred, with China deciding to price and trade oil directly in CNY instead of US$. This is a massive overt move against the US hegemony, which will be extremely interesting to watch. The days of US$ as the sole world reserve currency are numbered, as China puts on the pressure with its traders to accept CNY. This is never going to be an overnight move of course, but something that will take years and decades to play out.

Outlook for April 2018

The slide of US$ is expected to continue, we can expect to see asset prices starting to inflate. Assets such as US stocks have already been inflated over the years, but there are other places where opportunities exist. The biggest opportunity lies in the commodities market (hence my oversized exposure to the Basic Materials sector). Some other areas that provide good investment opportunities include: International markets (non-US equities), non-financial assets that can benefit from sliding US$ such as REITs, pipelines (i.e., real assets/infrastructure plays) etc, and Value-focused plays (the Value-factor has underperformed compared to Momentum-factor for almost a decade now!).

I will be looking for opportunities in these areas for new funds, but for now I am not desperate to make any moves and happy to sit back and watch market volatility make a comeback.

As of Mar-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.

8 thoughts on “Outlook for April 2018

  1. Thanks. That was an interesting article to read.

    Interesting thoughts about FAANG stocks. To me it sounds more like noise for now. Consumers will continue to do what’s they are used to. Use facebook, buy on Amazon, etc… As long as it’s convinient for them they will use it. We tend to forget the bad things really quickly. Just like market swings. One day it’s SELL SELL SELL, next week everything looks rosy and it’s BUY BUY BUY.

    As for the US currency trade. That will be an interesting development to watch. Smells like a war will be necessary between the two biggest economies to define a new power leader. Two leaders cannot coexist. Just my thoughts.

    • You might be right there, DIS. These kind of power shifts are seldom peaceful. If human history has taught us anything, these kind of changes have never been achieved peacefully and are usually result in wars. And with the advancements in the last century, wars are so much more dangerous when two nuclear powers face off.

      R2R

  2. It sure is a volatile market out there. I believe this will continue for the rest of 2018. In the past ten days, I chose to not even look at my values. I used to own all of FAANG stocks. Dumped Amazon and Google last year and added NVDA. Probably not the best decision but acceptable.

    • Hopefully you got in at NVDA and rode it to the top…I looked very closely at NVDA in 2015/2016 and almost bought it, but for whatever reason I didnt. Since then, the stock has shot up. However, it seems extremely stretched now with some of the multiples completely insane.

      Best
      R2R

  3. Wow i have read about that china move for years. Didnt know they actually did it. Makes you wonder when they are backed with so much gold.

    Ill keep any eye on it. Will the bric nations really work together? Seems like the usa is really forcing their hand at the moment.

    Cheers road

    • Yeah the Chinese have been patiently building their gold reserves, while playing by the US hegemonic rules for years. It was only a matter of time when they got to a certain stage, they would pivot and send signals to the international community that they are ready to trade directly in their own currency. Looks like this is the first shot across the bow.

      Interesting times indeed.
      R2R

    • I think I chuckled when Kudlow came right out of the gate and shouted to go long US$ and short gold. Not the smartest thing to do — giving trading advise when you are in that position.

      R2R

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