Alpha Portfolio - Beginning of a Bear Market?

February 2024

Welcome Investors!

Here’s your Alpha portfolio update for February 2024:

  • Returns so far this year +1.9%

  • Our leading stock is AMD currently at +20.52% while our position in Forestar Group is lagging behind at -5.13% but it has given us total returns of +97% since we first bought it.

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Beginning of a Bear in a long-term Bull market?

The start of 2024 has set the stage for an intriguing year in the world of finance.

As we reflect on the events of January and prepare for the journey ahead in Q1 2024, investors need to grasp the significance of recent developments and anticipate what lies ahead.

Let’s delve into key trends, decipher their implications, and outline actionable strategies for investors seeking to navigate the financial landscape.

1. Bitcoin ETFs: A New Investment Avenue

Bitcoin Exchange-Traded Funds (ETFs) have arrived, enabling investors to buy and sell Bitcoin as easily as stocks and mutual funds. These ETFs track the actual price of the cryptocurrency, providing a more accessible route to crypto investments.

This move democratises access to the cryptocurrency market, potentially drawing a broader range of investors. However, the long-term impact remains uncertain, as it could either boost or disrupt the crypto landscape.

Key Takeaways:

  • Consider diversifying your portfolio with Bitcoin ETFs to gain exposure to the cryptocurrency market.

  • Be cautious and monitor these ETFs closely, as regulatory changes and market dynamics can influence their performance.

  • Keep an eye on how institutions differentiate their offerings in this evolving space.

  • Some ETFs you can track: IBIT, BITO, ARKB, HODL & BRRR.

2. The Bull Market Continues

The S&P 500 has entered a new bull market, technically defined by both a 20% rise from its recent low and surpassing its previous high.

Bull markets often symbolise economic optimism and can attract more investors into equities. Is now the best time to go all-in on the market? I don’t think that it is and we have plenty of time this year to position ourselves correctly. Ideally, that would be on the pull-backs when the Fed announces rate cuts.

  • Historically speaking, Markets rally into recessions and top before the rate cuts are announced.

3. Amazon Prime Introduces Ads

Amazon Prime, a popular subscription service, has started serving ads during TV shows and movies for an additional fee.

This move could open new revenue streams for Amazon but may affect the user experience.

We did the analysis last year and found Google a better investment option than Amazon and that worked out well.

  • Monitor consumer sentiment and adoption rates to assess the success of this strategy. That will tell us whether Google is still a better choice than Amazon or if a switch is needed.

Neuralink, Elon Musk's brain-computer interface company, successfully implanted its first product, "Telepathy", into a human. It allows control of devices through thought.

This innovation has immense potential but raises ethical and safety concerns.

  • There is transformative potential for brain-computer interfaces in various industries. Speculative investors will use Tesla to invest in ‘neuralink‘ by using Elon Musk as a proxy for everything ‘Musk-onomics‘.

Q1's Investment Landscape 

The Federal Reserve's recent policy meeting hinted at nuances that could impact the markets. While the Fed refrained from rate hikes, the timing of future actions remains uncertain.

For the rest of this first quarter of the year, I am bearish and anticipate a pullback in the markets. I believe the Technology and Healthcare sectors will be the best to focus your trades on. I remain bullish on the overall markets for the long term so, see these as buying opportunities.

Geopolitical Risks

Ongoing geopolitical tensions, such as trade disputes and armed conflicts in various regions, continue to impact global markets.

These uncertainties can trigger market volatility and affect investor sentiment.

  • If you’re invested in Emerging Markets or MENA, consider strategies to hedge against geopolitical risks in your portfolio. Some can be mitigated through USD and Swiss Francs.

Market Sentiment

Investor sentiment has embraced a "soft landing" scenario, but excessive confidence can lead to market vulnerability.

Overconfidence can result in market overcorrections, particularly when gains are concentrated in a few stocks.

  • Continuously reassess your risk tolerance and investment strategy to adapt to changing market conditions.

The Bottom Line

The beginning of 2024 has set the stage for a dynamic year in finance. While opportunities abound, investors must exercise caution, remain informed, and adapt to evolving trends.

We’ll continue to maintain a balanced and diversified portfolio to withstand potential market turbulence. That’s why 45% cash holdings will protect against a 20% market decline in the worst case and a good buying opportunity if it does play out.