It’s been a while since I’ve sent a “sandwich” update. In fact, I haven’t been obsessing over it of late because I spent a great deal of time prepping the ingredients which are only getting tastier.
Past performance is not a guarantee of future performance
Looking over the history of our “Tuna Salad Wrap” (VCo Defensive 50) brings a large smile to my face.
Not only are we smashing benchmarks over all time horizons, but we are providing protection for our investors when it is needed the most.
Take the recent turmoil for instance.
From 19 Feb 2025 to 8 April 2025, the NASDAQ (darling of the global stock market) cratered -23.8%
Our “sandwich” strategy? -1.3% over the same period of time before making a full recovery, ending the month in positive territory while the rest of the market licked their wounds.
Past performance is not a guarantee of future performance
This makes abundantly clear to me that while we are not getting all of the market upside (about 70-80%), we are avoiding almost all of the downside.
What’s in store for 2026?
I believe that as we enter 2026 there could be one more debt-fuelled pump in equity markets, caused by emergency rate cuts in US to avoid sovereign default. Then inflation will come back with an almighty vengeance. The cost of living will rise so much that the global economy will crash. It will make the recent tariff turmoil feel like child’s play compared to the eruption of larger systemic issues. The stock market will, as it always does, foresee this coming and long before a recession is declared, stocks will crash, as will cryptos, and eventually, the bond market. Central banks will raise rates and tighten credit conditions to curb inflation but it will be too late, and there will be no more levers to pull. The markets will be forced to finally admit they are in stagflation and have been for a very long time.
It will be a long but eventual road to economic and stock market recovery. It will be at this low point that our “sandwich” strategy will aggressively re-enter the share market, however with less of a focus on US markets, and more of a focus on emerging markets like China & India. The assertive “Reuben sandwich” (The VCo Growth 85) will be even tastier from these lows!
If we think there is an imminent pump in equities, why aren’t we being aggressive now?
Although I believe there will be one more pump in equities, I am still not betting on it, because institutional fund managers may see super sized rate cuts as a sign of imminent market turmoil. This is already happening. Institutional money has been sitting on the sidelines while retail (Mum & Dad) money has dominated inflows into this obscenely expensive share market.
And for the record, I believe when all the above unfolds, crypto markets will be exposed for the scam they really are.
The bet you’re making
If one was to hypothetically stay in an index industry or equities-heavy fund right now, he would be betting that I’m wrong. If that bet pays off, he might add around +3% to his portfolio compared to mine. But, if he’s wrong and I’m right, he’ll lose around 40-60% of his portfolio, while I perform somewhere between -6% and +15%.
As we enter the final stages of this market cycle, the main street investors will be fixated on upside. The smart ones, however, will be obsessed with downside, to the point of madness.
I make some heavy predictions here, but please know that I in no way guarantee them. I could be wrong, very wrong. If you believe I am wrong, and are prepared to bet on that conviction, you wouldn’t invest with us.