A Record Run, A Fragile Ceasefire, and the Portfolio Holds Firm

At a Glance

The Asymmetric Edge strategy is up 14.87% year-to-date through April 21, significantly outpacing the S&P 500 and both 60/40 and 80/20 benchmarks. Over the trailing 12 months, the strategy has returned 32.4%. Since inception in January 2024, it's up 61.9%.

It's been another whipsaw month. Oil swung wildly on conflicting Iran ceasefire headlines, U.S. stocks printed new all-time highs before pulling back this week, and gold drifted lower before finding some footing.

Market Movement Summary

• 🚀 Asymmetric Edge up 14.87% YTD, still comfortably ahead of every benchmark despite the S&P 500's April rally narrowing the gap
• 📈 S&P 500 closed at an all-time high of 7,126 mid-month; Nasdaq logged 13 straight green days (longest since 1992) before giving back gains this week
• 🛢️ Oil whipsawed in a 12% range as Iran briefly reopened and re-closed the Strait of Hormuz
• ⛽ March CPI spiked to 3.3% year-over-year on a 21.2% gasoline surge, the largest monthly jump since 1967
• 💼 Big bank earnings mostly beat across the board; S&P 500 Q1 earnings growth tracking +13.2%

Portfolio Shifts

• Same four ETFs as March with modest weight adjustments after rebalancing
• Portfolio still holds zero direct U.S. equity exposure despite the S&P 500 at record highs
• DXJ saw the largest weight increase; EMXC saw the biggest decrease

One Number That Matters

Market Moves

Portfolio & Benchmark Returns

The strategy is beating both 60/40 (AOR) and 80/20 (AOA) benchmarks across every time period shown: year-to-date, trailing 6 months, trailing 12 months, and since inception. Against the S&P 500, the picture is more mixed. Year-to-date, Asymmetric Edge is up 14.87% versus 3.56% for the S&P 500, a gap that largely reflects the portfolio sitting out of U.S. stocks during the February-March selloff. Over the trailing 12 months, however, SPY is actually ahead of the strategy (38.6% versus 32.4%), thanks to U.S. stocks' massive rally through most of the past year. Since inception in January 2024, the strategy has returned 61.9% versus 53.1% for SPY, while maintaining significantly lower drawdowns.

Charting the Growth of $10,000

Year-to-Date

A hypothetical $10,000 invested at the start of the year would have grown to $11,487 in the Asymmetric Edge strategy versus $10,353 in the S&P 500.

Trailing 6 Months

Zooming out to the trailing six months, the strategy has grown roughly 15%, nearly triple the return of an 80/20 portfolio over the same period.

Year-to-Date Asset Class Returns

Crude oil leads YTD at +60.45%, followed by emerging markets ex-China (+20.67%), Japan hedged equity (+12.20%), and Russell 2000 (+11.72%). Gold is still positive at +8.39% YTD despite its volatile ride down from January's $5,589 all-time high. International stocks broadly have crushed U.S. stocks this year, with the MSCI ACWI ex-USA index up 9.59% YTD versus 3.56% for the S&P 500. Bitcoin is the year's worst performer on this list at -12.75%.

A Record-Setting Rally, Then a Pullback

The speed of the U.S. equity comeback has been something to watch. After falling as much as 7% YTD in early April, the S&P 500 roared back to fresh all-time highs above 7,100 by April 17 and the Nasdaq logged its longest winning streak since 1992. The weekend brought a reality check. Iran re-closed the Strait of Hormuz, the U.S. seized an Iranian ship, and the Nasdaq's streak broke Monday. By Tuesday's close, the S&P was back to +3.56% YTD.

Despite the rally, U.S. stocks still haven't cracked the top four of my rankings. Gold, EM ex-China, Japan hedged equity, and active commodities continue to show stronger momentum. That may change in May. For now, the data says stay the course.

Inflation and Jobs

March CPI jumped to 3.3% year-over-year from 2.4% in February, driven almost entirely by a 21.2% gasoline spike, the biggest monthly gas price jump since 1967. Core CPI rose just 0.2% month-over-month and 2.6% year-over-year, so the underlying picture is less alarming than the headline.

March payrolls came in at +178,000, well above the 59,000 consensus, with unemployment ticking down to 4.3%. A big chunk reflected healthcare workers returning from a Kaiser strike that depressed February's numbers. The labor market is cooling gradually, not collapsing.

Portfolio Allocations for April

The same four ETFs remain at the top of the rankings, with modest weight shifts after rebalancing. DXJ saw the largest increase (22.23% to 23.84%), reflecting its resilience through recent volatility. EMXC saw the biggest decrease (28.41% to 26.72%), as EM assets gave back some gains on dollar strength and oil-import concerns. HGER edged down slightly, and gold ticked up.

Where I Took Profit This Month

Target April allocations (Alloc %) vs. positions heading into the rebalance (Curr %). The Diff % column shows this month's buys and sells.

Monthly rebalancing locks in gains from outperformers and reinvests into names that have been lagging. HGER had grown to 34.28% before the rebalance, so I trimmed it back to the 29.85% target. Gold had drifted down to 17.83%, so I added to it. DXJ got a similar top-up. EMXC was close to its target and barely moved.

One interesting note: HGER's internal positioning has also shifted with the latest quarterly rebalance. The fund's model has rotated meaningfully toward petroleum and away from gold, reflecting the dominant inflation story of the Iran war. That kind of automatic rotation is exactly what I'm looking for from an "all-weather" commodity allocation.

Deep Dive: Stagflation, and Why It's Back in the Conversation

A word most Americans under 50 have never heard used seriously keeps showing up in financial headlines. Powell got asked about it at the March FOMC. Goldman, Apollo, and Stanford have all flagged it as a risk. The word is "stagflation," and it's worth understanding what it means and whether today's parallels to the 1970s are real or overblown.

What it is

Stagflation is the uncomfortable combination of slowing growth, rising prices, and often rising unemployment all happening at once. It puts central banks in a brutal position. Cutting rates to support growth feeds more inflation. Raising rates to fight inflation deepens the recession. Neither lever works cleanly.

The 1970s story

The classic stagflation era ran from 1973 through 1982. The trigger was the OPEC oil embargo, which quadrupled crude prices almost overnight. Gas lines stretched for blocks. Inflation surged to double digits while growth stalled. The "misery index" (inflation plus unemployment) peaked above 20%. It took Paul Volcker raising the federal funds rate to nearly 20% to break the cycle, triggering back-to-back recessions with unemployment hitting 10.8% in 1982.

What worked for investors

Traditional portfolios got crushed. U.S. stocks went essentially nowhere in nominal terms from 1966 through 1982, and inflation-adjusted, the S&P 500 lost more than half its purchasing power. Bonds did even worse. What worked were real assets. Gold went from $35 to over $850 per ounce, a 24x move. Commodities broadly kept pace with inflation. International equities also held up better than U.S. stocks.

Today's setup

The parallels are partial. We've got an oil shock from Middle East conflict, March headline CPI at 3.3% on a 21.2% gas price spike, Atlanta Fed's Q1 GDP estimate falling from 3% to 1.6%, unemployment at 4.3%, and the Fed under political pressure from the White House.

But core CPI is only 2.6% year-over-year, a far cry from the 10%-plus readings of the late 1970s. Wages are moderating. Inflation expectations remain anchored. Powell himself put it this way at the March press conference:

"I would reserve the term stagflation for a much more serious set of circumstances. That is not the situation we're in."

That's a fair read. The conditions are partially in place, but calling it "stagflation" right now overstates what we're observing. "Stagflation risk" is more accurate.

How this connects to the portfolio

My current positioning happens to overlap with assets that historically performed well in inflationary environments: commodities (~30%), gold (~20%), and international equities (~50%). I want to be clear this isn't a macro forecast. The allocation reflects where relative strength rankings have pointed, not a deliberate call on the economy. If growth reaccelerates and inflation cools, U.S. equities will climb back into the rankings and the portfolio will rotate. That's the whole point of following the data.

Wrap Up

April has been a reminder of how quickly things can change. A ceasefire that seemed unlikely in February has been extended twice. Oil swung between $82 and $95 in the span of a week. U.S. stocks printed fresh all-time highs and then pulled back within days. Through all of it, the strategy kept doing what it's supposed to do: rotating toward what's working and sitting out what isn't.

I don't know what May will bring. The same four ETFs still top my rankings this month, and the strategy is up 14.87% year-to-date. I'll take that and keep following the process.

Thanks for reading. If you have questions or feedback, I'd love to hear it.

Disclaimer & Disclosure

This newsletter is for informational purposes only and does not constitute financial advice, investment recommendations, or an offer to sell or buy any securities. The content is published as a journal of the author's personal investment activities and is intended for a general audience.

No Investment Advice: The author is not a financial advisor. You should not treat any opinion expressed herein as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of opinion.

Risk Warning: Investment involves risk, including the possible loss of principal. Past performance is not indicative of future results. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment.

Data & Accuracy: Information contained herein has been obtained from sources believed to be reliable, but its accuracy and completeness are not guaranteed. All expressions of opinion are subject to change without notice in reaction to shifting market conditions.

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