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2022 Recap: The worst, the best, and the stories behind
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Blue chip
joined discussion12/22/2022 15:22

2022 Recap

If I’ve to describe my 2022 portfolio in one word, it’ll have to be “boring”. The core and largest composition of my portfolio is in the banking sector and primarily in our local banking trio DBS, OCBC and UOB that have returned over 4%, 8% and 16% year to date respectively before dividends.

I’ve been holding DBS for the longest time, gradually increasing my stake whenever the stock was on sale, such as when investors were rushing for exits during the onset of COVID-19 pandemic.

As our local banking trio has proven to be resilient in an otherwise volatile market this year, they have been a saving grace for my overall portfolio and helped it to stay afloat in a falling tide.

I do not foresee any major shift in my investment plan for the upcoming year, as I continue to like our local banking trio for their strong fundamentals, robust balance sheets and competent managements, and will maintain my holdings or even increase them next year should the market makes irresistible offers to me. Barring a deep recession, I believe their net interest margins should benefit from rising interest rates, that track the Fed’s rate hikes to rein in a stubbornly high inflation.

A rally post US mid-term election had not materialised, defying past records, while Santa Claus looks likely to come and leave without bringing the usual cheers to the market this year.

I hope that the market will recover in 2023 after a turbulent year that witnessed the Fed’s aggressive rate hikes to rein in a surging inflation and global supply chain disruptions triggered by lockdowns and worsened by Russia’s invasion of Ukraine.

Technology sector, which had benefited tremendously at the onset of the COVID-19 pandemic, as corporations raced to accelerate digitisations of their businesses and operations, and individuals rushed to acquire or upgrade their electronic devices for remote working and studying, faced the greatest headwinds this year as their valuations are particularly sensitive to interest rates.

With a looming recession, corporations from big techs the likes of Microsoft and Meta Platforms to global banks such as Citigroup and Morgan Stanley  have announced layoffs and other cost-cutting measures. As a result, the market has priced in an increasing odd of a recession next year.

How the market will perform next year is going to be largely influenced by the Fed’s next moves next year. How fast the Fed hikes the rates is becoming less important than what is the terminal interest rate level at which the Fed will eventually ends its hikes and for how long will the restrictive monetary last.

While a recession next year appears to be inevitable, hopefully the economy will remain resilient and not plunge into a deep and long recession.

If history were to be any guide, the US economy will grow stronger after emerging from the macro headwinds. Hence, I plan to stay invested. Furthermore, market statistics has shown that time in the market will generate greater returns over time compared with timing the market which I’m terrible at.

All the best to you in your investment journey!
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