The broad markets have been volatile of late and dropped hard last week after the Fed disappointed with its 25 basis-point interest rate cut and the US and China engaged in tit-for-tat trade war escalation. A bigger drop came on Monday after the People's Bank of China (PBOC) devalued its currency, but things then rebounded as the central bank took measures to stabilize the currency. Things are looking interesting here because a bounce should have been expected after Monday's blood bath and now that it has occurred we are at a point where we either see some convincing follow-through or it all falls apart again. So far today, it looks like the latter could occur.
I have updated the stock and ETF portfolios this morning and both are performing really well despite the recent volatility. The ETF portfolio is benefiting from the gold miner position (XGD), the tech position (XIT), and the consumer staples position (XST). The stock portfolio is benefiting from three gold miner positions (KL, FNV, and AEM) and the other positions are still mostly holding up really well. That being said, Enerflex (EFX) finally rolled over and this morning I rotated it out of the portfolio. I have not quite decided what to replace it with but it will definitely be a defensive stock like a gold miner, renewable energy, or a utility company. Other options would be to add an inverse ETF or simply keep a higher percentage of cash. I will see what happens for the remainder of today and then likely make a decision early next week.
Here is a chart of EFX:
To be honest, I was more than patient with this stock and probably should have sold it a month ago but I wanted to give it the benefit of the doubt. This week it has crashed through the stop loss area as the oil and gas sector continues to get crushed.
The current weakness across many sectors brings me to an important point. If it were not for the gold and silver mining sector, the TSX would likely be in bear market territory. As per our risk management strategy, this is definitely a red flag and I encourage you all to reread the risk management page of the website. The portfolios are already well protected by the counter-cyclical gold mining positions but we may need to get even more defensive moving forward if some of our other strong performers start to show signs of weakness. We will see where things go from here but I am watching this closely because I do not want to give away all of the very solid gains that we have made in 2019.