We are contributing $3,022.49 to rebalance the speculative trading model.
Our baseline capital for the Speculative Trading Model is $100,000 which is reset each quarter. Of course it’s up to you to manage your own investment allocations. By resetting the Spec Trading Model to $100,000 each quarter, it’s easier to track performance and individual positions on a percentage basis.
As we enter the the third quarter, U.S. stocks are in a bear market and have experienced their worst first half in more than 50 years.
Investors became too exuberant in certain areas, anticipating the economic reopening following the coronavirus crisis. This led to unsustainably high stock prices which needed to come back to more reasonable levels.
Meanwhile, the rise of inflation is now a major concern. Higher interest rates naturally pressure stocks which has led to a major shift in market sentiment between late 2021 and where things stand midway through this year.
In the first quarter, our Speculative Trading Program did a good job capturing profits from many of these falling stocks. Our first quarter return of 151.59% was certainly well above “normal” and is not a profit level I expect to see often.
The second quarter was much more challenging. With stocks dramatically oversold, it made sense to position for a bear market rally in certain sectors. And some stocks DID in fact rebound sharply.
But the overall choppy nature of the market during the second quarter made it difficult to lock in sustained profits on individual positions.
For the second quarter, our model was down 38.49%, with the majority of those losses occurring in June.
To put that number into perspective, our Speculative Trading Model is still up 54.75% on the year, an attractive overall return despite the volatility.
Heading into the third quarter, our model is fairly balanced with a slight skew to the bullish side. We currently hold about 31% of the model in cash, giving us plenty of flexibility and dry powder to take advantage of the opportunities that emerge.
I’m expecting a more sustained bear market rebound sometime during the quarter. Meanwhile, there are still a handful of speculatively-priced stocks that are vulnerable to further declines. So we should have a good assortment of bullish and bearish opportunities to pursue in the second half.
I appreciate each of you subscribing to the Speculative Trading Model. This is a challenging environment for sure. But as we saw in the first quarter, even challenging periods can result in significant profits.
If you have questions on this model, on rebalance or allocation strategies, or any other issues, please feel free to reach out. I love hearing from you!
I’m looking forward to the quarter ahead and excited about the opportunities that will emerge!
Here’s to growing and protecting your wealth,