Cash is king – April 21st 2023

Mixed data and clashing opinions has led to continued volatility. As the Federal Reserve attempts to digest mixed signals from the economy, markets remain on edge and continue to trade as if thin seasonal summer months have come early this year. Liquidity has dried up across the investment landscape, if we exclude die hard bond holders, many participants continue to carry sizeable cash positions into a looming recessionary period. As major economies regroup, EM countries have emerged in full force. Meanwhile, US officials continue to deal with a credibility crisis from both Government and Federal Reserve which has begun to take a toll on the US dollar.

** Thoughts on RCG Portfolio Positioning
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** Dynamic Macro Strategy
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This strategy relies on historical data and quantitative methods to identify statistical disparities in global markets using highly liquid ETF’s.

“This strategy began to reduce exposure in the US earlier this year. We positioned into depressed EU and Asian markets (Eurozone, Germany, Italy, UK, Japan) as their central banks de-couple from the Feds questionable reaction function to high CPI and as USD strength eroded. We still favor structural supply-side deficient areas with weights in lagging US sector ETFs (XLE, OIH, IYR).” – Nick Diaz

** Inflection Strategy
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The strategy takes positions in highly out of favor US equities which we believe are inflecting due to changing fundamentals/events.

“We remain overweight energy names as we are in the early innings of a long up cycle. This is due to a decade of underinvestment in the sector, unfavorable climate policies and outright dismal returns from too many highly leveraged and poorly managed companies. These stocks all have strong cash flow, recently lower trending debt balances and extremely low valuations.” – Stefan Lingmerth

** Safe Haven Strategy
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This strategy protects capital during inflationary environments and seeks to maximize yield using fixed income instruments and defensive assets. PM – Nick Diaz

“With CPI still well above FED target levels and a prolonged inversion of the yield curve, we continue rolling capital into short duration (sub 12m) T-Bills at or above a 5% level. We also remain long precious metals which the market has finally recognized as an inflation hedge and currency backstop. “ – Nick Diaz