Daily Brief - Investing in 2022: the 6 assets to own (Jan 6, 2022)

It’s always exciting to plan ahead for the new year - and that certainly applies to investing.

In the second installment of our review of investing themes for 2022, here’s a list of asset classes for you to consider when preparing for the year ahead.

Please read our disclaimer at the end of this email.


Today we’ll discuss six asset classes to include in your portfolio in 2022. They range from Meme Stocks to Gold:

Here’s a list of 6 asset classes to own, each championed by a famous investor.

1. Value Stocks

Warren Buffet, the world’s greatest value investor

Enough with these calls of overvalued equities. The stock market these days is more polarised than the political landscape in the western countries.

On the one hand, there are TSLA and a coterie of other growth stocks who are driving SPX ‘to the moon’. On the other hand, there are hundreds of stocks at all-time-low P/E.

If the market will turn on us, mean reversion will bring value back to the spotlight. So if you want value in your portfolio you can find it in spades. Check the “Cheap Valuation” filter in Explore.

2. Meme Stocks

Elon Musk, genius, billionaire, playboy, philanthropist

If ‘meme stocks’ seems like a silly term to you, remember these securities are close cousins with a type of stock widely studied by academia: momentum stocks.

Underlying all those 🚀🚀🚀 rocket emojis is one of the most stable investing drivers in the world: the continuation of trends.

Simply put, stocks that are trending are bound to keep trending - or so goes the empirical evidence. If you want a counterpoint to your oversold value stocks, consider adding a basket of stocks that have been trending higher for the last few years.

Of course, don’t forget the old trading desk rhyme - trend is your friend until it bends at the end.

3. Bonds & TIPS

Bill Gross, once dubbed King of Bonds

As someone who actively shorted bonds for a good part of our careers, let us tell you that shorting bonds is Not Fun (™). A combination of carry and low volatility makes bonds always more attractive on the long side of your portfolio.

Sure, unwinding QE + hiking rates is unlikely to drive these bonds much higher. And bonds don’t seem to be much of a risk-off hedge anymore - just look at the last month.

However, bonds remain a good way to keep a stash of dry powder to reload on equities when the market retraces. And they provide yield.

Also, if you want an inflation hedge look into TIPS i.e. treasury bonds that pay up in proportion to inflation - here’s the US 10Y TIPS.

Bonds are still your friends, even if you don’t hang out with them as often as you used to.

4. Crypto

Mike Novogratz, former Goldman partner and successful crypto investor

You know you want it.

As crypto finds its way into mainstream investing, and tries to find viable solutions for its monstrous energy consumption levels, institutions are taking note.

Whether it’s because you fear inflation or because you want momentum in your portfolio, it’s time to think seriously about the role of crypto in your baskets - even Peterffy converted to crypto.

And guess what, if you like to buy after a good washout now’s your time: Bitcoin just fell 25%!

5. Commodities - for growth and carry

Louis Winthorpe III and Billy Ray Valentine, notorious commodity traders

Was COVID good or bad for commodities?

One story says commodities are crashing because of faltering demand (from Omicron this time), the other story says they are rising because of the supply chain crunch caused by COVID in general.

As the latter is much more persistent than the former, we definitely edge towards saying that commodities might have a role to play throughout the recovery.

But here’s something interesting that you might not know: were you aware that commodities carry interest?

Here’s some numbers from US futures (all links lead to the chart):

This carry is the difference between the price of the commodity now, and the price paid in one year. If sugar in 1 year is 20% cheaper than today, then Sugar has 25% carry.

6. Gold and other shiny metals

Uncle Sam, the largest investor in gold worldwide

Not much to say here - gold is one of those commodities that defy market laws.

On the one hand, Gold is associated with an inflation hedge so if you are worried about inflation, make a space for the shiny metal in your portfolio.

On the other hand, a new round of QE can always be around the corner and gold is a hedge against devaluation of fiat currencies.


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