This has been one of the worst years in the financial markets for individual investors ever. Not only did stocks fall this year, but so did bonds, thereby turning the 60/40 stocks/bonds portfolio strategy into a huge money loser. But professional money managers did not fair much better, and several celebrity managers performed so poorly it was embarrassing. You can put Cathie Wood at the top of that category as her flagship ARKK fund fell over 60% so far this year, and we got one more day left to go.
There also has been outrage from individual investors who put all of their money into crypto or into a few once leading stocks, like TSLA, that got burned badly. Putting all their eggs into fad plays turned out to be a disaster strategy. The big run in AMC and “meme stocks” in early 2021, though, made many people think the game is easy and a lot of gurus told them it was in order to grab their attention. Now some of those folks are being bashed.
Kevin O’Leary’s account seems to have been hacked by scammers…and nobody noticed the difference. 🤣 pic.twitter.com/mvvJVqq3YU— Bitcoin Archive (@BTC_Archive) December 29, 2022
The bigger the rally, the bigger the fall, and vice-versa. https://t.co/qVzC1NZ1Ke— David Brady (@GlobalProTrader) December 29, 2022
It’s time to turn the page on this year and move forward, you can’t do that blaming individual people for talking you into bad situations.
You move forward in markets by learning from the wins and the losses – and finding out how winners win.
Hopefully, today will be a green day for everyone, but in this year of carnage it turns out that Macro Hedge Funds turned out to be the big winners. The Financial Times found that such funds made an average return of 8.2% in the first 11 month of 2022. That put them on track for their best year going back to 2007.
While most people simply buy stocks and bonds, these funds also have the ability to bet against both, and also often engage in bets in the currencies and commodity markets too.
It was obvious to many of these macro fund managers that interest rates would go up this year when the year started and so they bet accordingly. According to HedgeWeek, “Caxton Associates chief executive Andrew Law who gained 30.2 per cent to mid-December in his $4.3 billion macro fund, and Said Haidar, whose New York-based Haidar Capital has gained 194 per cent through its Jupiter fund, helped by bets on bonds and commodities, having at one stage this year been up more than 270 per cent.”
While these hedge funds ruled in 2022, the weird thing is hedge fund investors are actually throwing their money at strategies that lost money last year. “Forty-one percent of hedge fund investors want to increase their exposure to credit strategies, according to the latest hedge fund report by Preqin,” says Institutional Investor. These funds have been down 6.9% going into December. People are buying them with the idea that the Federal Reserve will stop raising rates and that will generate a huge rally in bonds.
I’d be careful with that notion, because I believe interest rates actually began a secular trend of rising yields when the Federal Reserve took rates down to zero in 2020. Sure, we’ll get short-term moves up and down within that secular trend, but I just don’t see things going back to the way they were like so many people seem to think, even after the Fed makes its last hike of this current tightening cycle.
This is why it makes sense to think in macro terms now.
There is more to investing than just buying stocks and bonds.
You can look at commodities, currency markets, and even foreign markets for more opportunities.
The US dollar index rally that began this year came to an end two months ago and foreign markets, as a whole, have been outperforming the S&P 500 ever since then. One ETF, which I own a position in, that I’ll be watching to see if this trend continues is EEM.
This ETF for emerging markets rallied up into its 200-day moving average in the last two months of the year and is now trading sideways in a triangle pattern. I’ll be watching to see if it breaks to the upside next month or rolls over and breaks down.
A break to the upside would signal a potential stage two bull market.
If you spent the past two years watching Cathie Wood videos, crypto videos, and so forth I’d suggest you throw that all to the side and spend some time studying the life and strategies of successful maco investors of the past if you want to do better in these markets. The classic Market Wizards book has interviews with a bunch of them you can learn from.
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