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Ouch!!! Inflation came in hot.

Feb. 29, 2024
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Wiko Steyn
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Wiko Steyn

Monthly ETF Contribution

 

Inflation came in red hot again.  We feel like a broken typewriter stuck in a loop. Yesterday was the worst day in the stock market since June 2020. Where is the good news? When will the stock market be fun again? If you only started investing in the past year, we can sympathise with you. It's been tough. If you are a long-term investor, this is an opportunity to buy your favourite companies for less. This is the typical advice we are seeing from optimists and perma-bulls.  This is a great mindset and we obviously understand this concept, but honestly, a little bit of green in our portfolios will go a long way. 

Ironically we view the potential for a deflationary environment in 2023 as one of the biggest risks for the US economy. If the Fed over-tightens, based on their lagging indicators, they run a real risk of breaking something in the economy. Cathie Wood, the once-loved ARK ETF CEO and CIO, has repeatedly warned about deflation and the mistake the Fed is making regarding interest rate hikes. 

ARK currently runs 8 disruptive innovation ETFs which they believe will shape the future of our world. These funds, along with Cathie Wood were superstars in 2021 with explosive growth. The current environment has not been kind to unprofitable, high growth, high beta, story stocks which make up most of the ARK ETFs. In the cut-throat environment of fund managers, it seems like Cathie has lost her reputation. Although we do not agree with all of ARks stock picks, we do share some of the same ideas. Being long innovation is basically being long humankind. We believe in a brighter future and this makes us long innovation. 

Secondly, the risk of a recession makes deflation a real probability. If you want to understand the dangers of deflation, study the economy of Japan. For now, we are following legendary investor Peter Lynch's advice.

In Investing Your Stomach Is More Important Than Your Brain


Portfolio Update Summary

Luckily our ETF portfolio is low maintenance and let's call it lowish stress levels. Investing a percentage of your saving into diversified ETFs each month, means you are buying on the way down and also up, taking the futile pursuit of timing the markets out of your hands. We have made our monthly allocations to all our ETFs in this portfolio. 

 

Disclosure

This is not financial advice and only the opinions of the author. The $28K in the ETF portfolio is not real money and is only a demonstration of a typical portfolio. 


 


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