Nick Hodge,
Publisher
Aug. 6, 2024
Most investors have been rocked to start the month.
The S&P has lost as much as 8% in the past two days — erasing two months’ worth of gains and sending the volatility index to its highest level since the COVID selloff of 2020.
Commodities have been soft as well. After falling to hold support in late July, the S&P Goldman Sachs Commodity Index has shed ~10%.
A combination of factors is in play.
Bond yields have cratered quickly, with the 2-year yield now at 3.9% — down from 5% just two months ago in a truly remarkable move that now has the yield curve threatening to un-invert for the first time in more than two years.
In short, we’re seeing a sharp pullback across multiple markets as disinflation spooks commodities while a weak earnings season has led to a tech rollover.
Gold has been the haven as bond yields and stock prices sink. The yellow metal has added as much as $100 in the past week, and remains near $2,400.
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And while the selling has been widespread, certainly hitting our commodity-related positions, the rate-sensitive positions and staple positions we own, and which I outlined for members of Foundational Profits in the July issue ahead of this move, have been on the other side of the trade.
In fact, we recently got bigger in the three sectors that are now leading the S&P. Amid the selloff, tech and consumer discretionary have rolled over while real estate and utilities actually went up. So did consumer staples.
Three positions we own in those sectors — one REIT, one utility, and one consumer staple — have all hit 52-week highs in the past week.
Gold, of course, is near all-time highs. Cash has been yielding a risk-free 5%.
And we don’t own them in small quantities.
Those five positions make up some 45% of the Foundational Profits portfolio. Meaning nearly half our portfolio is hitting highs or can’t go down during this selloff.
That’s what quality portfolio construction and diversification is about. And it’s why showing members exactly how I construct my retirement portfolio — with specific weighting percentages — matters.
You can get the July issue that covers those positions here.
The full August issue will be out this Friday.
Call it like you see it,
Nick Hodge
Publisher, Daily Profit Cycle