By: Drizzt Been a busy week. And its gonna get more busy next week.. This doesn’t mean that i don’t have time to do a mini review of my portfolio. The objective of this round of review is more to align my current allocation to an allocation that i believe will do better going forward.

Macroeconomics

While i believe in holding a portfolio in the long run, your allocation should evolve to target the world going forward. Some instruments that work in the past might not be the best instrument going forward. Take the example of bonds. Bonds have a place in the portfolio due to its historical low correlation with equities and it reduces the volatility of your portfolio. However, going forward, the greatest disadvantage of bonds will rear its head if you like me believe that inflation is going to be above historical average. The thing about macroeconomics is that you can make a good gauge about how its gonna be but you cannot be 100% sure, and this is how i am feeling now. The main views:

• The inflation situation is going to be above the last few year’s average.
• US Big Caps hasn’t outperform for sometime.
• Commodities demand is sustainable due to emerging market demand.
• Brazil, Russia, South Africa, Australia is both a domestic consumption play and also a major commodities exporting play.
• Small Caps are in a bad position. Careful selection needs to be exercised
• More negative news is expected to come out. I don’t see a bottom yet.
• Agriculture is both taxed by energy needs and increasing demand from increasing consumption

This would shape the decisions that i take when i structure my portfolio. Read more....