However, this punch bowl is now slowly being taken away. Developed market Central banks are raising interest rates and reducing their balance sheets. It comes as no surprise that volatility has increased amidst this massive transition.
The S&P 500, the benchmark for US equities, is down -17% year-to-date (YTD). This decline is mostly attributed to technology-related stocks. The Information Technology sector is down -24% YTD, Consumer Discretionary (Amazon, Tesla, Apple) is down -30%, and Communications (Google, Facebook) is off by -28%. The sectors that have led the markets higher for the last decade, and thus became the market’s largest components in the process, are now leading the market lower. Click here to read more about concentration risk.
Historically, the volatility in markets could be offset by holding fixed income. However, 20-year treasury bonds are down -18% YTD. In other words, the traditional conservative asset has also participated in the drawdown.
This is where balancing risk comes in. Our portfolios, down less than 5% YTD, have weathered the storm through global diversification, rebalancing, and our increased exposure to market alternatives.
With our current environment, we felt it imperative to restate our 2022 Investment Strategy from our OUTLOOK 2022 Booklet. Let us know if you would like a copy of the fully electronic version.
Intelligent investing comes in many forms, and at times, from unexpected places. How you invest during times of transition is as important as what you invest in.
As always, our door is open. Please call with any questions, concerns, or general feedback.