August was eventful in the US stock market as there were sell-offs amidst less impressive Q2 earnings reports. These sell-offs have left many pondering their next moves, while the Fed’s battle against persistent inflation adds another layer of intrigue to the global economic space.
Amidst this financial turbulence, the BRICS summit takes centre stage, with leaders from Brazil, Russia, India, China, and South Africa converging to discuss similar economic aspirations and ambitions. The backdrop of this summit is not only about strengthening ties among these emerging economic powerhouses but also the subtle yet significant battle for currency domination.
Let’s delve into the strategies and insights you need to steer your investments through these uncertain times, ultimately aiming to emerge stronger and more informed amidst the currents of uncertainty.
Asset Classes Overview
August was a rough month for the stock market. The S&P 500 index closed the month negative, down by -1.77%. Our Rise Equity portfolio barely closed positive, up by 0.33%, beating the benchmark index. Amidst the sell-offs in the market, we activated our market hedges to reduce the impact of the market downturn on our stock portfolio.
We added two more positions to our stock portfolio last month: Adyen and ProShares UltraShort S&P500. We recognized a unique buying opportunity in the market for Adyen when the stock was down by 14% in a single trading day amidst a weak Q2 earnings report. In our investment thesis, we are convinced the Dutch payment company has great business fundamentals and significant upside to boost our overall portfolio.
Also, we opened a short position on the S&P 500 index to offset the downward market movement. This position inversely mirrors the overall market performance, helping our portfolio stay green for the month.
Regardless of the current market conditions, we remain optimistic about the prospects of the stocks in our portfolio and will continue to make quick and insightful strategic decisions to optimise our returns. We encourage you to approach your investments with a long-term perspective and a diversified portfolio strategy.
Our Rise Real Estate portfolio returned 1.07% in rental income this past month. Ripple effects from rising interest rates can be seen in higher mortgage rates, higher home prices, and higher rental income, which we have benefited from.
Home prices in the US climbed for the fifth straight month amid tight inventory. Buyers are battling over a limited supply of homes for sale and are resorting to renting instead. The median home value-to-income ratio in the US now stands at a record ~ 4.5x. This is 45% above the historical average of 3.1x, with the median home payment now at a record $2,800/mo, up by 90% since 2020.
Currently, renting a house in the US requires 35% of the median pre-tax household income. Buying requires ~46% of the median pre-tax household income. Simply having a place to live has never been more expensive.
While rising mortgage rates have pushed some would-be homebuyers to the sidelines, there’s still plenty of demand from determined shoppers, who are left to battle over a severely limited inventory of listings. Elevated prices spurred by the supply crunch and higher borrowing costs have made this the most unaffordable housing market in many years.
The average 30-year mortgage rate reached 6.79% in early June, according to data from Freddie Mac. It has since jumped to 7.23%, further squeezing buyers.
With a soft landing in sight for the economy due to robust economic growth and slow growth in inflation figures, we expect to see a turnaround in the real estate market. Our real estate asset portfolio provides investors with stable and consistent cash flow and is a haven in this inflationary period. You can own real estate assets by investing in our real estate portfolio or through a direct purchase in your name.
Our fixed-income investments generated a return of 0.83% for the month of August 2023 against the backdrop of an evolving global economic and geopolitical landscape, this performance underscores the resilience and stability of our fixed-income strategy.
With the Fed’s preferred inflation measure, the PCE, ticking upward to 3.3% in August from 3% in July 2023, the market is already pricing another rate hike in September 2023. This further rate hike benefits our fixed-income portfolio amidst a higher yield on treasuries.
As we look ahead, we anticipate developments in various sectors to continue to shape market trends. Stay vigilant and informed, and remember that wise investment decisions are built upon the foundations of research and analysis and a willingness to adapt to changing market conditions.