Asset classes continue to be highly correlated to the downside with stocks and REITS taking the most hit. Safe-haven assets were also down, albeit, to a lesser degree. Even commodities that have been the driver of inflation corrected sharply after the 0.75bp rate hike.
While inflation is still in the backdrop, the long end of the yield curve is retreating since mid-month. The 10-yr yields came back down from a high of 3.49% to under 3% at month-end. With recession probability rising which might well be the scenario needed to bring inflation back down to earthly levels, and longer-term Treasuries no longer hovering below 1%, we are starting to see a more normalized behavior of safe-haven assets, especially US treasuries. Below is the breakdown by assets and geographies of the multi-strategy model maintained with iFAST as of the end of Jun.
With every asset class down for the month, it was difficult for a long-only portfolio. Volatility trading also added to losses as there wasn't a clear movement in implied vol either way. In the end, the overall portfolio was down 5.5% for the month. This brings the year-to-date loss to 16.3%.
Let's see how our retirement heroes are faring at the end of Jun 2022.
John, 31 years old, looking to retire in 19 years
John invested USD 40K upfront at the beginning of November 2020 and he regularly contributed USD 500 every month subsequently. As of the end of Jun 2022, he has contributed USD 49.5K. If he sticks to his plan, he can expect to withdraw USD 7.5K every month when he retires in 19 years without ever depleting his retirement nest egg.
Paul, 51 years old, looking to retire in 9 years
Like John, Paul invested USD 40K upfront at the beginning of November 2020. However, he knows he has a shorter runway than John to compound his portfolio. The good thing is that he has a higher income than John so he contributes USD 4K every month subsequently. As of the end of Jun 2022, he has contributed USD 116K. If he sticks to his plan, he can expect to withdraw USD 9.5K every month when he retires in 9 years without ever depleting his retirement nest egg.
Sam, 66 years old, already retired
Sam doesn’t have any runway to compound his wealth as he is already retired. Fortunately for him, he had accumulated USD 1M of savings which he invested upfront at the beginning of November 2020, and started to draw out USD 10K every month from this portfolio. As of the end of Jun 2022, he has already drawn a total of USD 200K but his portfolio is still worth about USD 820K. He can expect to continue drawing USD 10K every month while his portfolio value remains about the same. This is a 12% withdrawal rate in a retirement account that never depletes.
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