Originally published on Oct 2, 2022
This has not been a good year for my stock portfolio. This year had been characterized by bear market rallies which whipsawed my stock portfolio (more on that later). It is a year to be remembered for risk management and survival through decisive exits.
About 4 months ago in June 2022, I decided to move into China/HK stocks after the market showed some signs of recovery. 3 weeks later, I decided to exit China/HK stocks because my China/HK stock picks performed poorly despite a good performance from China/HK stock indices in June. I wondered what was wrong with me then. Usually, my stock portfolio will move hand in hand with the indices but this time, I lost money despite the indices going up. Either something is wrong with me or the market is telling me there is worse to come. I cannot allow the self-doubt to continue because it will take away my courage to re-enter the market when the bull market eventually returns. So, I decided to sell the China/HK stocks to protect my financial and mental capital.
Since my exit from China/HK stocks in early July, Shanghai Composite Index is now down by about 11% and Shenzhen Composite Index is down by more than 14%. It was a close shave but there is nothing to gloat about since I lost money.
About 1 month after I exited China/HK stocks, I decided to enter the U.S stock market after the market showed signs of recovery. I started buying U.S stocks in early August 2022. The experience this time was better. My U.S stock portfolio enjoyed some profits as the U.S stock indices moved up in Aug. Unfortunately, the good times ended on 26Aug2022 when the Fed Chairman warned about pain ahead as he is committed to using his power to fight inflation forcefully.
I remembered that night was a Friday and I stayed up late to observe market movements till the U.S market closed. I decided to sell ALL my U.S stocks before the market closed. If Friday marks the start of a bear market rally reversal, my profits can quickly turn into deep losses.
https://twitter.com/Market0bserver8/status/1563915756068225024
Since my exit from U.S stocks one month ago in late Aug, S&P500 is now down by 11.6% and Nasdaq100 is down by 13%. Phew. That was another close shave. Again, it is nothing to gloat about since I did not make much money in the first place.
This year 2022 is a year to be remembered personally for close shaves from stocks to cryptos like Anchor/UST and Hodlnaut demise.
Luckily for me, my biggest position had been in cash this year. Even luckier is that I happened to be in the right type of cash -> USD. Being in cash is no consolation if you hold the wrong type of cash. British Pound is down 21% versus USD year-to-date and the Japanese Yen is down almost 26% year-to-date. Thanks to the strength of the USD, my overall portfolio is down in the low single-digit percentage year-to-date when adjusted to SGD.
Thanks to the strength of the USD, the biggest financial winners in 2022 are American savers.
Global stock markets are in shambles.
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| Stock indices ranking |
The above table ranks the performance of global stock indices. Only 4 are in positive territory. Singapore's Straits Times Index(STI) is ranked 4th and is slightly positive with a 0.21% gain but if adjusted to USD, STI is down 5.79% year-to-date. I did not expect the top winner to be Turkey's Istanbul 100 index.
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| Stock market internals ranking. |
As can be seen in the above table, global stock market internals is horrible. The percentage of stocks above the 50-day moving average and the 200-day moving average is low across the board. Even in the best-performing stock market in terms of market internals (India), the percentage of stocks above the 50-day moving average remains below 50%.
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| Forex ranking |
The top 10 currencies in 2022 year-to-date are either currencies that belong to commodity-producing countries(Russia, Brazil, Mexico, Middle Eastern Arab countries) or currencies pegged to USD (Hong Kong, Qatar, UAE, Saudi Arabia).
Below them are the currencies of Southeast Asian countries. Singaporeans should count our blessings. SGD and STI did relatively well so far in 2022.
The Federal Reserve has made it clear that it will not reverse its high interest-rate stance as long as inflation remains high. The Fed looks determined this time. Maybe the Fed might reverse its stance if one of the too-big-to-fail financial institutions gets close to implosion. That would be a signal to get back to the market.
Mr Market seems to be suggesting that some big banks are in danger, in particular, the 2 European banks Credit Suisse and Deutsche Bank. If you think Mr Market is wrong, you can swoop in as a value investor.
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| Super low price-to-book ratios of some too-big-to-fail banks |
I will remain mostly in cash until I see signs of recovery in the stock markets. I humbly admit I am not good enough to catch the bottom.
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