June Portfolio Update
Here's an update on the portfolio's performance. If you have missed my portfolio review for 2021, please check it out here. 2022 Performance YTD My Portfolio: -25.31% Vanguard 500 Index: -20.02% Performance since inception (Jan 2021) My Portfolio: -24.22% Vanguard 500 Index: 2.78%
It's the worst H1 for the US stock market in more than half a century. This came in as no surprise as the market continues to dive in the month of June. S&P 500 drops more than 8% in the month of June- putting the month of June almost on par with April. Aside from Dow Jones, the other two indexes (S&P 500 and NASDAQ) are in bear territory at the end of June.
With the exception of the energy sector, all the other sectors (utilities, healthcare, consumer discretionary etc) all report negative returns in H1.
I guess the constant theme we have all been hearing/seeing in 2022 is inflation. Many has attributed the lacklustre performance of the US stock market to inflation. To combat inflation, interest rates need to be raised. When interest rates are raised, investors fled risky assets and this causes a significant drop in the market. This especially rings true for Bitcoin (more on that later on).
With a 0.75 percentage point increase in interest rate in June and more to come in the following months, it might be hard to be optimistic about the market in 2022.
But hey, the S&P 500 actually reversed a plunge of 21% in the first half of 1970 and gained 26.5% in the second half to eke out a gain in 1970. So that's some hopium.
(Source: Portfolio Visualizer)
The most glaring loss in this month has to be Bitcoin. A drop of more than 40% in the month of June officially makes it the worst month on record. The whole cryptocurrency sector has been seeing great fear in the recent months with large cryptocurrency firms announcing layoffs, LUNA collapsing in price and prominent crypto hedge funds like Three Arrows Capital defaulting on loans. You can almost smell the fear in the air. In such a high inflationary environment, investors tend to divest their most risky asset first and cryptocurrency in its infancy stages now happens to be the most risky asset for some. This creates a vicious cycle and that is how we end up with Bitcoin prices below $20,000 now. I have been an advocate of Bitcoin. Pertaining to this tremendous drop, I have written an article on my thoughts. You may check it out here.
Another unstoppable trend seen all year is the drop in ARK ETFs. For ARKK and ARKG in my portfolio, this is the eighth consecutive month that they have a negative monthly returns. There wasn't even a breather. This isn't a single month in the whole of 2022 when they report a positive return and that really caught me by surprise.
The silver lining here is the performance of the China stocks Both MCHI and Alibaba have strong returns in the month of June. Hadn't it been for the dramatic drop in Bitcoin's price, my portfolio should have had better returns than the Vanguard 500 Index in June. Hopefully this marks the change in tide for the China markets.
A second month of double digit drop sure isn't pretty but I have conviction in my portfolio's choices.
Let's see how H2 turns out.
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