The way to make money in the first half of 2023 was to declare your independence from Wall Street.
At the start of the year, the top forecasters were predicting the S&P 500 would have a bad first half, as the U.S. would slide into recession.
Reality? The S&P 500 turned in a stellar 6 months, rocketing 17%.
And they said the index would end 2023 at around 4,000.
In reality, it’s already nearly 4,500 — higher than all but one of 17 forecasters expected for the full year.
As for the recession: We are still waiting.
Back in January, the Street’s top money managers said the U.S. stock market would be a terrible place to be for 2023, and way worse than Europe, Japan, or, best of all, emerging markets.
In reality: So far this year the S&P 500 has beaten Europe, Japan, and emerging markets.
And emerging markets, the big money managers’ top pick so far this year, has been the worst region, gaining just 5%.
It doesn’t end there.
At the start of the year, the world’s biggest money managers also said that you would be much better off in cash and Treasury bills, commodities, and hedge funds than you would in stocks.
Quick: Name three assets that have been a much, much worse investment so far in 2023 than stocks.
Give up?
Cash and Treasury bills have earned you less than 3% interest. Commodities are actually down 8%. As for hedge funds: The HFRI Hedge Fund Index says that through the end of May, the average hedge fund investor had so far earned 0.3% this year. No, that decimal point is not in the wrong place.
Nor does it end there. Among the few sectors on the U.S. stock market that the big-money crowd actually liked back in January were energy and banks.
Energy stocks are down around 5% so far this year. Worse than almost every other sector, Apart from — you guessed it — banks!
The SPDR S&P 500 Bank ETF has managed to blow 19% of your money in 6 months, thanks in part to the risk management departments of Silicon Valley Bank – among others.
It’s yet another reminder that you won’t get rich following the crowd. Or, as the late Hollywood screenwriter William Goldman said of Tinseltown, “Nobody knows anything.”
I wrote about this recently: Our simple 8-fund portfolio is crushing the market and the ‘smart’ money—again
Just to update the results through the end of the first half: The assets that top money managers liked the most ended up losing you, on average, 0.6% during the first six months of the year. (That’s based on an equally weighted portfolio of 8 ETFs tracking their 8 favorite tradable assets.)
During that same period a typical portfolio of 60% U.S. stocks and 40% U.S. bonds, as for example tracked by the Vanguard Balanced Index Fund, gained you 10.4%.
Ouch.
Meanwhile, the assets these smart guys liked the least would have earned you 17.8%. That’s based on another portfolio of 8 ETFs tracking their least-favorite tradable assets — the portfolio we call, with tongue somewhat in cheek, “Pariah Capital.”
What will the next half hold? Stay tuned.