7 moves to make today to insulate your portfolio from global and market uncertainty…
Hello, Jared Dillian here.
Russia has invaded Ukraine and global markets are in upheaval.
The implications for your portfolio are profound.
In a moment, I’ll show you 7 moves you can make today which could deliver you significant upside. First, however…
We need to talk about inflation…
Because as you’re about to see… the 7 moves I suggest you make today work even if inflation continues at a record clip.
They also work in a geopolitical context of broad uncertainty apart from high inflation.
What I mean is, high inflation is not a secret anymore. Cat’s out of the bag on inflation.
The question is… with conflict in Europe, disrupted global trade, commodity spikes… Which ideas work given all those factors PLUS high inflation?
That’s where my 7 trade ideas come in…
But let’s back up…
Inflation Like We’ve Never Seen Before…
The primary impact of war is inflation—for all commodities, but particularly for food, fuel, and metals.
We already had 40-year record high inflation before this current conflict started, but now, inflation could be about to go parabolic.
International trade is breaking down, which is also contributing to inflation.
And all of this feeds into an inflationary psychology, which is accelerating to warp speed as we speak.
And to think—this is (as I write) caused by a regional conflict on the other side of the world. If this were a global conflict, we’d see commodity prices we’ve never before imagined.
So logically, we should invest in commodities.
Here’s the Catch with Commodities
But “investing” in commodities isn’t a good idea 90% of the time.
Human beings figure out more efficient ways to drill for oil and increase crop yields year after year.
We had a 20-year period where commodity prices went down and the prices of financial assets went up.
Now that is happening in reverse—both stocks and bonds are facing stiff headwinds and the prices of things we need are going up.
Let’s follow this thinking through on commodities…
How does one invest in them?
Well, if you are a high-net-worth investor or an institution, you could do it yourself via futures contracts.
If you have no exposure to futures trading, now is probably not the best time to learn.
But there are commodity index ETFs that invest in baskets of commodities for you—DJP is one; DBC is another.
Both have their own peculiarities. And so, the “dumb” way to invest in commodities is to invest in these ETFs.
That’s a start… but it doesn’t get your portfolio where it needs to be in times like these.
Modeling Scenarios to Find Trade Ideas
Those two ETFs aren’t official recommendations from me. They’re simply ideas I’m sharing to show you how I’m thinking about the market at this moment.
We need to dig deeper… you need a wider set of solutions right now.
In short, you should be looking at big names, mega-caps with strong balance sheets, pricing power, and the ability to absorb (even benefit from) geopolitical uncertainty…
We’ll get to 7 specific tickers which fit that template in just a second…
But before we do, we should model some scenarios to check our thinking.
- What if a series of (possibly aggressive) interest rate hikes from the Fed don’t tame inflation?
- What if there’s a recession around the corner… What if we’re already in recession?
- What happens if the conflict in Ukraine spreads? What happens if it ends in the next few days?
- What happens if global trade and supply chain issues get worse, not better?
- What happens if there’s a severe reduction of available semiconductors for high-tech manufacturing?
- What happens if tech stocks pop quickly? (There’s evidence of this happening already… ARKK was up 10% on Wednesday, March 16.)
- Oil prices… gold… shortages of household staples… the list goes on and on.
Look, my goal here is not to overwhelm you with “what ifs”... and it’s not to confuse you or frighten you either.
Quite the opposite, in fact.
From a sentiment perspective, my primary focus is modeling various scenarios like those above and coming up with trade ideas which work for as broad a spectrum of outcomes as possible.
Said another way, what I’m thinking about all day everyday right now is…
“How many global macro factors can go sideways all at the same time… and what names still work even in that environment?”
I sit around thinking about questions like this so you don’t have to.
Which brings me to The Wartime Portfolio… and what it can do for you right now.