This is a quarter that reeked of blood for my portfolio.
While SPDR S&P 500 ETF (NYSE: SPY) declined by 6.4% at the end of the quarter, my US portfolio has already entered the bear market. It triggers the memory of 2022 bear, which caused my US portfolio to plunge by a whooping 44% for that year!
Unlike the previous episode though, I’m feeling less anxious this time around.
A key reason is the reduced exposure to high-growth counters in my portfolio. These companies, while promising rapid revenue increases, typically operate without profits and may even burn through cash.
This does not mean that the stock prices of my current holdings will be impacted less negatively. However, the resilience of the underlying businesses and potential for stronger recovery offers significant reassurance.
Moreover, the profits I realised from my portfolio last year have reduced the absolute amount of the current losses.
These very periods underscore why I allocate only about 30% of my portfolio to US stocks, as the remaining 70%, primarily SG income stocks, had a relatively good quarter with a 2.6% YTD gain.
Like a large band-aid, this has helped to slow the bleeding to a much more manageable 4% for the quarter, offering hope for potential recovery by year-end.
Top and Bottom 5 Performers
Now, let’s take a look at the five largest wounds and band-aids for the quarter.
Arista Networks (NYSE: ANET) and The Trade Desk (NASDAQ: TTD) are the two largest wounds. Arista being one of my top five holdings, felt like an arterial wound, accounted for near to half the blood loss this quarter.
The market is currently concerned about the potential reduced spendings of its two major clients Microsoft (NASDAQ: MSFT) and Meta Platforms (NASDAQ: META) on their AI infrastructure.
While I do not deny this possibility, both Microsoft and Meta have projected an increase in their capital expenditure this financial year. Even if the reduction materialised, it would be more likely be deferment of purchases as it has happened before, rather than outright cancellation.
Hence, I am not overly concern about the current development. Over the long term, Arista is likely to continue to grow at a respectable rate, considering its market position and maturity.
Turning to the other significant wound this quarter, The Trade Desk. My earlier thoughts on the significant drop of its share price can be found here.
The band-aids came from my pertinent favourite Parkway Life Real Estate Investment Trust (SGX: C2PU), or PLife, and Singapore’s three major banks DBS Group (SGX: D05), OCBC Ltd (SGX: O39), and United Overseas Bank Ltd (SGX: U11).
I’m unsure about the cause behind PLife’s stock price increase, though its reliable distribution and the less appealing returns of Singapore Savings Bonds and T-bills (under 3%) seem like plausible explanations.
As for the three Singapore banks, it is clear that they have found favour from the market due to their continued robust performances, increasing dividends and upcoming capital return plans.
If you are interested, my analysis on whether Singapore banks are still a good buy in this article.
Will the Ghost of 2022 Bear Return?
Looking ahead, the big question remains: Will we see a repeat of the 2022 bear market?
The truth is I don’t know.
However, my sense is it won’t turn out as bad as 2022.
As illustrated in the above image, the absolute loss is only about a third of what was witnessed in the comparable period of 2022.
This improved outcome, even considering a smaller portfolio, is notably due to the steady performance of my REITs, a stark contrast to their significant decline in 2022.
Barring any new wounds, or further aggravation of existing ones, the thicker dividends paddings coming in the next two quarters, should stop the bleeding.
Despite the hope for dividend relief, I’m prepared should conditions deteriorate further, having proactively positioned my portfolio for downturns, as discussed in these posts:
Ultimately, while the current quarter has been challenging, it’s vital to stay calm and avoid impulsive reactions.
By focusing on the long-term growth, we can navigate these periods and stay on track towards our financial objectives.
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