My experience is that all equity portfolio managers are deeply superstitious. Maybe this is just generalizing from one instance, but I’m pretty sure that this is true–but not spoken about much.

Two reasons:

–we’re all like sailors in a small sailboat afloat in a gigantic ocean, in that there are so many factors that are not under our control, and

–generally speaking, the industry is ruthlessly efficient in eliminating non-performing managers. Yes, there are exceptions: a manager may have substantial gains while consistently underperforming in a raging bull market (think: Japan in the 1980s); or there’s the rare instance (I can only think of one) of a manager convincing his bosses to accept an inappropriate target index that virtually anyone can beat.

Mine is this: I don’t like to talk about my performance. Yes, I have to analyze it. But this year, so far, has been so unusual that I thought I’d take a look at how the world in general and the various sectors in the S&P have done so far this year–up until about noon EST today.

The year-to-date scoreboard:

Gold +52.5%

IT +29.8%

Communication services +25.4%

EAFE (Europe, Australia and the Far East) +24.0%

NASDAQ +21.7%

Utilities +17.5%

Industrials +17.1%

S&P 500 +16.5%

Euro/USD +10.4%

Mexican peso/USD +9.7%

Consumer discretionary +9.0%

Financials +7.7%

Healthcare +4.8%

Energy +2.8%

Materials +1.7%

Real estate +0.5%

Staples -1.1%

The first thing to note, I think, is the strength of gold, which (although I don’t get it at all) is generally thought to be a hedge against inflation and, in the minds of foreign central banks, a substitute for the dollar. The general idea, as I see it, is that the world thinks the Trump administration wants to return to the pre-Volcker days when the Federal Reserve was not an independent monetary authority. The presumed purpose would be to create an increase in inflation that would lower the real value of Treasury bonds–and therefore the burden of redeeming outstanding Treasury bonds. A good trick, in a narrow sense, but one that’s also a significant step on the road to becoming a third-world economy.

A second is that the US has been a laggard stock market since the inauguration. This is arguably due principally to the decline in the world value of the dollar. On closer inspection, though, there’s a second, more indirect but also more important (I think), currency effect: sectors where costs are generally in dollars but revenues at least significantly generated in foreign currency, stock performance has been strong. In contrast, sectors where revenues are predominantly in dollars but costs are in foreign currencies (even the Mexican peso), margins have apparently been squeezed. In any event, performance in this latter area has been especially weak.

In the case of Industrials, the sector name is, I think, somewhat misleading. The companies in this sector generally make things to be sold by firms in the Consumer discretionary sector. Industrials also contains the defense and aerospace sectors, however. That is where the money has been made this year, I think–supplying weapons and outfitting ICE.

Basically, the winning pattern so far this year has been to own IT, Communication services and foreign stocks (I’ve chosen Chinese tech and industrials)–and to stay away from areas like luxury goods, where costs are in foreign currency, with revenues at least partially in dollars.