Stability

Dear Fellow Investors,

 Stability

           Weekly TLT or the 20 year Treasury Bond as traded on the Nasdaq

This chart reflects the climb in US interest rates in 2022. 20 year interest rates have climbed from 0.5 % to now just under 3 % This has resulted in massive losses by pension and bond funds as well as individual bond investors.  It has spilled over into stock markets worldwide. The technology focused Nasdaq is down 32 %, the Dow Jones 14 % and the S & P 12 %. European markets have also been hit. Most Asian markets have also suffered.

Our KLSE and Singapore markets have held up relatively well.  The KLSE since the beginning of 2022 is down 1.47% while Singapore is up 2.16 %

Malaysia has been supported by high palm  and crude oil prices while Singapore has benefitted from strong property and financial  stocks. Inflation and interest rates have been relatively benign compared to the US and UK. Singapore and Malaysia also have virtually no exposure to Ukraine and Russia. To get through the Covid pandemic aid money was given to those having financial stress but not on the scale of developed countries.  Malaysia and Singapore gave out a few hundred million while Biden spent trillions.

Going back to the weekly 20 year US bond chart, price has fallen to the 2017-2019 solid weekly support. This means interest rate stability at these levels and a possible peak in US inflation and a bottoming out of US stock markets. For stock markets to stabilize, interest rates must stabilize as stocks are a derivative of bonds.

On Friday, world markets reversed and closed much higher. The catalyst was a brief statement by Jerome Powell warning that he was concerned about deteriorating liquidity. It was a signal to traders that he might pivot to easy money and a resumption of QE. QE will lower US interest rates and that is why the 20 year Treasury bond on Friday went up over 3 %, a huge and unusual move.

If Powell follows through on his statement expect a good rally which will benefit our holdings. Do expect volatility but rest assured we hold solid companies for you that should get us through the storm.

Keep safe

Bill

Baby giraffe in US zoo fitted with custom leg braces to help it walk properly.