Q1 2022 was the worst quarter for stocks in two years. The MSCI World index ($SWDA.L) lost 5% due to the war in Ukraine and worries about the consequences of tighter monetary policy by the Federal Reserve.
Our strategy outperformed the index by more than 7 percentage points. The strategy also slightly beat the Value stock index $VTV .
The strategy is staying invested in stocks because although the yield curve briefly inverted last week, sending an early recession warning signal, stocks have gained 8% in the 12 months after inversion, on average.
“The current spreads indicate that the probability of a recession is still below 50%,” notes Philip Marey of Rabobank.
However, we are not rushing into the riskiest areas of the market and maintain a balanced exposure across sectors.
$ROG.ZU (Roche Holding Ltd) and $AZN.L (AstraZeneca) were replaced by $VIE.PA (Veolia Environnement S.A.) and $BDEV.L (Barratt Developments), slightly increasing the risk level of the portfolio.
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“State of Play”
– KKR forecasts $SPX500 will end the year at 4750, and will further increase to 4840 in 2023.
– They note that the best-performing market segments during the stagflationary 1970s were Value stocks ($VTV), Small Caps ($VB), REITs ($REET), and Commodities ($DJP).