U-optimize @U-optimize: "Performance Overview YTD. 𝙐-𝙊𝙥𝙩𝙞𝙢𝙞𝙯𝙚 +10.41% S&P..."

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Performance Overview YTD. 𝙐-𝙊𝙥𝙩𝙞𝙢𝙞𝙯𝙚 +10.41% S&P 500 +7.42% The expectations that we have hit the limit on rate hikes gave a green light for growth stocks to rebound from deeply oversold levels. For the 1st quarter of 2023, we have seen a rebound in broad indices on the back of solely growth factor outperformance (+6.10%). All other main factors underperformed the benchmark by high single-digit figures. The market has yet to start to price in a higher probability of the credit cycle turning in the wrong direction in the 2nd half of this year. After a recent banking sector credit event, the Fed injected more liquidity into the system to help banks withstand deposit outflows. Some market participants view this action as a new QE program that should drive stocks higher. Unfortunately, this has nothing to do with the QE and does not affect the overall net liquidity parameter, which is the main driving force for the valuation multiple expansion. This positive short-term effect from extra liquidity has zero probability of contributing positively to the long-term economic growth trend. Considering the recent economic data, the probability of a soft landing has diminished even more (less than 5%) and is not our model outcome. The conditions for making a deficit in overall market liquidity are more evident now. They are more likely to create more pressure on the riskiest type of assets in the medium term. The squeeze in oversold names that drove the market higher could be a good opportunity to hedge the portfolio against deeper drawdowns during a more challenging market environment in Q2 and the rest of the year. The recent inflation readings on an annualized bases have accelerated and are still far from the levels needed for the Fed to back off. Also, as oil prices rebounded sharply, the market is underpricing the probability of more rate hikes. The combination of higher oil prices and a more robust equity market can reaccelerate inflation, thus prompting the Fed to take an even tougher stance. At this point, some risk-off scenario will likely commence earlier than expected. Since the last time, we have increased our short positions and raised some cash to enter new positions at more attractive levels. The only sectors where we currently hold overweight positions are Energy (+9.2%) and Materials (+2.4%). Our beta to the market has decreased from 1.1 to 0.5, and could be lowered to neutral at the beginning of another leg lower. Overall defensive stance is preferable heading into the next 3 months period. $SPX500 $IWF $NSDQ100 $XLE

4 Mentioned

SPX500

IWF

iShares Russell 1000 Growth ETF

NSDQ100

XLE

Energy Select Sector SPDR