Portfolio Update – May 2023

United States

The month of May started with a very weak JOLTs report, which showed us some weakness in the labor market. However, the report has been unreliable more often than not lately, and the market wrote it off as such. In hindsight, it was right in doing so.

Indeed, despite the initial jump higher earlier this year, claims are plateauing around 240K for initial and 1800K for continuing. Recall from my portfolio update of April: “Unless we start to see the initial claims printing above 240K-250K consistently, we shouldn’t consider it very meaningful in terms of monetary policy impact. Furthermore, despite the high numbers we got in the first half of April, the unemployment rate is still at 3.5%, which is historically low”. We have yet to see these high initial claims prints, and although the unemployment ticked up higher to 3.7% in June’s NFP, it’s still far from being concerning.

Speaking of NFP, it’s been almost an entire year of the actual number being higher than consensus.

Chart by Credit Micro to Macro, who I can’t thank enough for his patience in answering my numerous questions.

Moving to the FOMC, they hiked 25bps as expected. As always, the presser had some interesting insight between the lines. Firstly, the Fed is not expecting a mild recession, but rather moderate growth: that is coherent with the GDP numbers and the tight labor market. Secondly, and this was more important in my opinion, it was made clear that there won’t be any cut (as I have been saying for months now) but a pause is on the table. Nothing surprising here, I too was expecting a pause after June until recent data, but the implications are what matters: indeed, now that’s confirmed a pause may happen soon, the debate shifted from when will it come to how long will it last.

Moving to inflation numbers, despite the optimism after both CPI and PPI came roughly in line with expectations, PCE came in hotter than expected, ruining the pivot party and increasing the likelihood of another hike in June. Furthermore, despite the overall positive reaction to the prints, I’d like to point out that even if CPI grew just by 0.4% MoM (both headline and core), that amount annualized is still double the target: there is still work to be done, it’s too early to celebrate victory in the battle against inflation.

In any case, the market’s expectation of a hike in June was short-lived. Indeed, thanks to some Fed members hinting at a “rate skip”, at the time of writing (June 2nd, 2023) the market is back at expecting a pause in June. If I have to be completely honest, naming it “skip” rather than “pause” is extremely clever: the outcome is still a pause, but this way the markets won’t expect a cut as next move.

Implied rate probabilities – CME

Larry Fink, CEO of BlackRock, said he expects the Fed to hike two to four times more, and I’m humble enough to recognize Larry Fink has better information than me. Therefore, my view got updated from “25bps in June and probable pause after” to “25bps in June, 25bps in July, and we’ll see what happens next”.

Equities don’t seem to care about anything I’ve written here, pushing hard to make everyone believe we are back to a new normal and the bull market is back, but fortunately other markets do.


Moving to Europe, the ECB hiked by 25bps to 3.25%, to which the market initially reacted by selling the euro as many participants expected a hike of 50bps. Interestingly, since the ECB hinted at “future decisions” with the plural, the reading was of another 25bps in both June and July, leading to a terminal rate of 3.75%.

Interestingly, the slowdown in the pace of monetary policy tightening came only days after the eurozone banking data showed the biggest drop in demand for loans in over a decade.

Chart by Reuters

However, the persistent high inflation remains a concern, as the +6.1% YoY is definitely higher than the targeted 2% mark. There is some optimism surrounding the slowdown in inflation, but it is important to highlight that the primary driver behind this decline is the decrease in energy prices: European infrastructure has not significantly improved since last year, and relying on the odds to get another unusually warm Winter may not be a reliable strategy. Therefore, the true test on European inflation will come in the coming months. In any case, core inflation is proving itself sticky, which may be enough to further de-anchor inflation expectations.

Chart by Reuters

Regarding the overall economy, Germany’s ZEW dropped to -10.7, missing the consensus of -5.3. This decline reflected a diminishing level of optimism among market participants and, unsurprisingly, a few days later the country’s GDP figures confirmed that it had entered a technical recession.

While this data point holds significance, I believe the overall excitement surrounding the “technical recession” was somewhat exaggerated. Indeed, technical recessions often serve as noisy signals when it comes to predicting actual recessions, as demonstrated by the example of last year’s technical recession in the United States. This is not to imply that everything is in perfect condition, quite the contrary, but it is important to approach information with a level-headed perspective and not overreact to the extent that some did.

However, it’s quite ironic to see that the once-called PIIGS are now growing more than Germany in real terms.


There isn’t much to say about equities for the month of May: both the NIKKEI and the DAX reached an ATH, the S&P 500 broke out of the range and pushed to August 2022 highs, and the Nasdaq went parabolic pushing towards March 2022 highs. The fuel for this run-up is, as it has been for all the year now, a combination of gamma, overly-optimistic narratives, and liquidity.

Starting of course with Nvidia, if one was to look only at the price and nothing else, he would assume the results were incredibly good, but they weren’t: revenues and earnings were down 13% and 20% YoY, respectively. However, the company did beat both the top and the bottom line estimates, although these were so low that it would have been a true disaster if they didn’t.

But the 26% jump that led it to a new ATH wasn’t because of actual results, but rather because of the strong guidance of $11B in Q2 revenue. This guidance is incredible, and I mean it both ways: it’s hard for me to believe they’ll pull it off, but if they do, it will be an amazing job. If the former is the case, we should expect a guidance down-revision between the end of June and early July.

Daily Nvidia $ change since 2015. Usually we would use the percentage move, but the market capitalization gained in the move justifies using the dollar change instead. Chart from Brent Donnelly.

I stand by the idea that it’s absurd to have a $800B company when revenues are less than $8B, but I gave up on this trade. There are only two ways to profit from a bubble: the first one is to buy early, the second one is to sell after the reversal. It’s too late to buy, and still too early to sell.

Moving to Disney, after their results I wrote a few thoughts on Benzinga. I won’t repeat myself here, so to summarize I don’t think it’s a smart choice to go all-in on parks when the economy is expected to contract later this year.

Finally, the recent move by Robinhood to introduce futures trading and 24-hour trading on their platform caught my attention for a few reasons. I, for one, can’t wait to witness the esteemed r/wallstreetbets community accidentally taking delivery of truckloads of corn. Additionally, the launch of these features by Robinhood serves as a confirmation that retail investors are back in the markets with force, which served as a topping indicator several times already.


I’ve seen friends blowing out their accounts these past few days, traders getting depressed because the market isn’t going their way, and bulls euphoric as never before. I’ve chosen to cut the noise and just go mostly cash. At the end of the day I’m still getting paid interest on my liquidity, so it’s not exactly a bad choice. I have no idea the direction the stock market will go in the short-term, breadth is terrible and valuations are extremely stretched, but it wouldn’t be the first time this year anyway. Generally speaking, though, no parabolic move ever resolves with a sideways action, so we shouldn’t be surprised when the decline finally comes.

Finally, I’d like to quickly address a few points some haters made on me this month. Firstly, although I do have a personal account and do trade on it, neither my Twitter account nor this newsletter is focused on my trades. If you have been here long enough, you know it well already. Secondly, there is a big difference between being bearish and being positioned bearish, and an even greater one between having a position and being all-in: even my Nvidia short, which was closed at loss, was closed at -8.7% and the overall impact on the portfolio was less than 2%. Why don’t I share the percentage allocation of each position? Because I’m not selling my portfolio and I couldn’t care less about what others think about it: both gains and losses are on me anyway. Instead of succumbing to the negativity of online hate, I’d encourage you to go outside and appreciate the experience of life. Trust me, it will uplift your spirit and bring you a sense of peace.

So, the positions as of May 31st, 2023:

  • Long: Farmland Partners (NYSE:FPI)
  • Short: None

Cash roughly at 95%, mostly in dollars. In terms of new positions, in the near term I’d like to buy MOWI around 180 NOK and IonQ between $3.5 and $4. Furthermore, I plan to go long SHY if the 2Y gets back to 5%.