The year 2022 started with a major market correction. The Enhanced Permanent Portfolio reference account lost -3.84% while the S&P500 lost -5.82%, ACWI lost -5.05% and Europe -4.31%. Defensive Treasuries were down -3.91%, Gold down -1.68% and the Bitcoin was down -16.4%. At the moment we have a unusual strong positive correlation over all asset classes so that portfolio diversification does not help much to reduce drawdowns and volatility. The simple cause is, that rising yields are equally bad for Treasury prices and for equity.
Nearly -1% of the -3.8% portfolio loss was due to our currency hedge, which includes a mayor position in short term inflation protected treasuries (VTIP ETF). The base yield of this ETF increased from 0.3% to 0.8% within a month, which resulted in a 1% loss of this position. This however is not really of great concern as to this 0.8% the actual inflation of about 5% are added, so that VTIP should pay about 6% of dividend this year or about 1.5% quarterly dividend by end of March.
Your Rational Invest Team
Walter Baumann / Frank Grossmann / Thomas Ritter
Tel +41 79 306 11 60 / Email