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A. Stotz All Weather Alpha Focus – January 2022

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All Weather Alpha Focus was 0.5% below the 60/40 portfolio in January. We expect Fed and ECB to do what they can to prop up markets. Economic recovery is going to continue in 2022, which makes equities attractive. The new Indian Gov’t budget could stimulate continued high growth and keep the Indian stock market strong. Risks: New lockdowns, unexpected Fed rate hikes, crash in the Indian market.

A. Stotz All Weather Alpha Focus is Global, Opportunistic, Long-term, and Defensive:

  • Global – Invests globally, not only Thailand
  • Opportunistic – Tilts towards asset classes, sectors, regions, and themes in a quest to enhance returns and manage risks
  • Long-term – Gains from long-term equity return
  • Defensive – Aims to reduce extreme losses during equity market downturns

All Weather Alpha Focus is available in Thailand through FINNOMENA, and you can learn more here. Please note that this post is not investment advice and should not be seen as recommendations. Also, remember that backtested or past performance is not a reliable indicator of future performance.

Review

World stocks retreated slightly in January

Performance of the World stock markets

  • US was hit hard in January, especially tech-heavy NASDAQ
  • Most Asian markets kept up well
  • EMEA was mixed, most European markets were down

Poor start of the year for World equity

  • January 2022 saw a lot of volatility and ended down 4.6%
  • Fed convinced the market of rate hikes and fighting inflation
  • Geopolitical conflicts around Ukraine led to further uncertainty
  • Omicron uncertainty remains a wet blanket

Healthcare performed the worst

  • World healthcare was down 9.9%, underperforming World equity by 5.3% in January
  • As healthcare stocks did well in December, they corrected harder in January

Big drop in Info Tech in January 2022

  • As the overall market reacted negatively to Fed’s rate-hike signals, Tech stocks took a big hit due to high valuations and fell by 5.8%
  • World Info Tech showed higher volatility than the overall market in January
  • The World Info Tech fund ended the month as the second-worst performer among the funds the strategy invests in

Infrastructure ended below World equity

  • World infrastructure fell by 5.2% or 0.6% more than World equity

India performed the best within equity

  • India was up by 1.3%, outperforming World equity by 5.9% in January
  • Indian stocks started January strongly but retracted as global markets fell
  • While foreign outflows continued, the market got support from strong domestic buying

Fed rate hikes and falling Tech

  • S&P 500 recorded its worst monthly performance since March 2020 at -5.5%
  • Fed signaling rate hikes in March 2022 led to an equity sell-off
  • US Tech stocks saw large falls due to high valuations
  • US-Russian tensions around Ukraine added uncertainty

Russia aims to supply Europe directly

  • Around 50% of Russian gas to Europe flows through Ukraine
  • With Nordstream II (red line), Russia aims to bypass Ukraine
  • US fears Russian expansion, and Russia fears NATO expansion

The money market remained flat

  • The Thai money market was flat in January
  • The main purpose of our money market allocation is downside protection
  • Most other funds the strategy was invested in were down in the past month; hence, a bigger allocation to bonds would have been better

Gold affected by the Fed too

  • Gold was down by 0.7%, falling 3.9% less than World equity
  • Gold closed January at US$1,797/oz t
  • Gold initially did well in January due to the stock market turmoil and geopolitical games
  • However, as the Fed signaled more aggressive rate hikes, the US$ strengthened, and the gold price fell back sharply

Alpha Focus got hurt by the recent equity fall

Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, expressed or implied is made regarding future performance.

  • Three months is a short period to evaluate any performance
  • As equities fell worldwide, the strategy got hit hard
  • Though it reduced the gap to 60/40 by the end of January

Alpha Focus was 0.5% below the 60/40 portfolio

Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, expressed or implied is made regarding future performance.

  • India was the main positive at 1.3% up
  • Of our three tilts, only India performed better than World equity

All Weather Alpha Focus is an exclusive strategy available in Thailand through FINNOMENA, learn more here. 

DISCLAIMER: This content is for information purposes only. It is not intended to be investment advice. Readers should not consider statements made by the author(s) as formal recommendations and should consult their financial advisor before making any investment decisions. While the information provided is believed to be accurate, it may include errors or inaccuracies. The author(s) cannot be held liable for any actions taken as a result of reading this article.

Posted in All Weather Alpha Focus