ABC Portfolio - May'22 update

Performance & Portfolio updates - May'22

Performance

May ’22 saw significant unwinding in all markets led by the US & China, and asset classes i.e., bonds, equities, FX, commodities and crypto. India mirrored the global trend in equities and bonds esp. small and mid-caps.

The narrative globally shifted to a necessary tightening by the FED and other central banks to control runaway inflation, which may result in a recession in due course. Policy moves to control inflation were seen as India banned wheat and sugar exports and applied higher export duties on steel and iron ore. Indonesia halted palm oil exports for a period and the UK is contemplating a tax on the windfall profits on energy companies.

We used the weak sentiment to add to our positions, especially in the accounts activated recently.

Developments in the trends we invest into in the ABC Portfolio

1. Manufacturing ecosystem – Materials took a significant hit in May as export duties were hiked. This will likely cause a postponement of capex which is longer term bullish for commodities despite near term unwinding.

2. Organized agri-business – Export bans on wheat and sugar will cause stress in the system for traders and financiers.  This will result in a higher cost of doing business which promotes the shift to organized firms.

3. Digital platforms – A shakeout started in the start-up ecosystem as funding crunches hit. This may cause many firms to pivot from B2C to B2B which will help digitized ecosystems in the long run.

4.Supporting infrastructure – Activity levels continue to improve in this space driven by Govt. spending

5.National Champions – The tricky scenario for oil marketing firms is slowly improving as some price rises were incorporated followed by a fall in excise duties to balance marketing margins and consumer costs.

Summary & Outlook

In our opinion, the events of May are likely to be a feature and not a bug, as the world transforms its core foundations – energy sources, supply chains and reserve currencies. Volatility will be much higher given the state of flux.

In the ABC Portfolio we incorporate long range thinking to visualize trends of the future and short-range thinking for timing and selecting our purchases within the long-term trends.