Q2 TPP Strategy Results Unveiled - It's Another Market-beating Quarter!

We are now halfway through 2023 and it’s been a tale of sectors. Big tech has driven a rally in the US after such a terrible 2022.

Friday’s session marked the end of the first half of 2023—and the six-month stretch was one for the history books.

Silicon Valley Bank and Signature Bank failed early in the year, giving investors a jolt of fear, but attention quickly shifted to tech stocks amid excitement over artificial intelligence. All that came amid rising tension between the U.S. and China, Russia battling Ukraine, and the Federal Reserve fighting inflation by raising interest rates—sparking concern about a potential recession.

“Investors have had a lot to contend with thus far in 2023. Moderating economic growth, persistent inflation, volatile interest rates, falling profits, the stress in the banking sector, war in Ukraine, and the debt ceiling debate all combined to weigh on sentiment,” said John Lynch, chief investment officer for Comerica Wealth Management. “Nonetheless, large-cap equities and mega-cap tech names have jumped higher, providing a degree of relief for investors.”

But not all stocks have done so well.

The big picture masks some nuances: Technology shares, after cratering in 2022, have carried index returns. And comparing the index’s market-weighted (15%) and equal-weighted (5%) returns illustrates just how much the mega-cap stocks ― primarily tech-related stocks across IT, telecom services and consumer discretionary ― have driven year-to-date performance.

In the regime now forming ― the post-COVID era ― stock valuations, inflation and interest rates are all higher. Supply is being constrained by demographic trends (ageing populations and fewer workers), decarbonization and deglobalization, all of which are inflationary.

Going forward, the Fed is more likely to be in a position of having to fight inflation rather than bolster the economy, a less friendly scenario for financial markets.

Equities historically have been the highest-returning asset class over the long term, and we see nothing to alter that precedent. However, higher stock valuations than at the start of the prior regime plus higher interest rates mean less return from markets broadly (beta). We see more dispersion in earnings estimates, valuations and stock returns ― and this suggests a greater opportunity for skilled managers to generate more alpha.

The result, in our view, is that the years ahead will see active return being a bigger part of investors’ overall return profiles.

While US big tech has had a great start to the year, most stocks have traded sideways. The equal-weighted S&P 500 which gives a better idea of average stock movement in the US is only up 5%. This is still more than the FTSE 100 which has had a very mediocre start to the year losing -0.2% in the first 6 months.

In contrast to this, the CAC 40 in Paris is up 12% and the DAX 40 in Frankfurt has increased by 14% in 2023. However, they did suffer in 2022, putting both markets only up around 3% since the start of 2022.

Bitcoin has had a great start to the year as well but this shouldn’t be looked at without considering where it fell from. The hype is mounting again as Bitcoin is now up 78% in the first 6 months of 2023, BUT, this is still 56% lower than where it was trading in November 2021. It would need a further rally of 130% to reach its all-time high. That is a long way to go.

Looking at global equity market performance for Q2 in 2023, here is a quick summary of how indices from around the world have coped with the difficult conditions:

So, with this backdrop, the question on everyone’s lips is how did The Portfolio Platform’s strategies perform in the same timeframe.

The good news is that the average strategy traded on TPP made 5.43% in Q2 alone. Add this to the average of 7.8% in Q1, and TPP are beating the indices once again.

We had several who were linked to a disappointing FTSE and were muted in their performance, but we also had several strategies that performed fantastically well.

Here are the top 10:

Leader Board - Top Trading Strategy

As you can see, TPP has had another good quarter, but what lies ahead?

After being blindsided by the resilience of the US economy thus far, humility is the order of the day for the sell-side pros who remain at loggerheads on what’s ahead.

Goldman Sachs Group Inc.’s David Kostin expects stocks will gain further, while Morgan Stanley’s Mike Wilson and JPMorgan Chase & Co.’s Marko Kolanovic have warned investors to stay away. At Bank of America Corp., there’s a disagreement under the same roof, with Savita Subramanian emerging as one of the most optimistic market voices as colleague Michael Hartnett says a renewed downswing is coming.

As for markets in the UK, we are hoping that inflation starts to slow, interest rates pause, and UK stocks get the kind of run that we’ve seen from our European peers. The FTSE 100 is still off 5.7% from its highs earlier in the year. The ‘banking crisis’ left its market in London and we have been slower to recover than the US, even though we didn’t actually have a banking crisis over here and it was entirely contained within the US.

One thing is for sure, and that is that our strategies will continue to do their best. TPP is growing quickly, and this is because we’re giving investors something they want, a chance for something different. Long may this performance continue and we appreciate your support as always.

Looking ahead to Q3:

Whilst the start of 2023 and Q2 have been dominated by tech stocks and crypto, both of these asset classes tend to move more than many investors are comfortable with.

Occasionally they will perform like they are currently, as momentum takes hold, but at the same time- when these markets whipsaw, it’s often the amateur investor who is left carrying the can (and taking the pain). The pain of 2022 still lingers for many.

Although our strategies do have some exposure to US stocks, they tend to be smaller positions than the ones held in their European counterparts.

Most of the traders of our strategies use the FTSE 100 as their benchmark, so with the average strategy on TPP delivering over 13% in 2023 already- the overperformance is large.

This is despite many holding positions in an underperforming FTSE 100. Therefore, when the performance of this market improves, it could be an excellent 2023 for our strategies.

Over the 3 years of trading so far, the average strategy showcased on TPP has generated over 40% per annum. Although this is higher than we would expect, if the climate allows for a stronger return than normal- our strategies tend to capitalise.

We hope your portfolio is in line with the average performance of our strategies in the first half of 2023. If it isn’t, then contact our team to discuss further diversification.

Some of our strategies have been higher this year than they are now. Therefore, we’ll be very well placed when they return to future highs.

Have a great week, and start to Q3. 😀

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