June 2022 update - Full defensive

The US stock market is now officially in a bear market. What that means is that US stocks have fallen 20% or more since their peak. Some sectors of the market have fallen much more than that: technology, communications services and consumer discretionary stocks have all lost at least 30% so far. Last week, the Federal Reserve hiked its interest rate by 75 basis points, trying to fight off inflation. But that might cause the economy to slow down, maybe even go into a recession. A lot of economic indicators have already turned red, suggesting a recession in the next year or so. Meanwhile, the Canadian stock market dropped last week by over 6%, falling below the level where I believe it signals a danger, so it warrants cutting exposure to Canadian stocks. Stocks from the UK and Japan, the remaining markets I follow more, have not fallen as far as others. But with so many other markets and economies showing danger signs, there’s little reason to believe these ones will remain unscathed, so I recommend cutting those as well and going full defensive. Interesting to note that the US stock market has been by far the worst performing market among big developed markets since the start of the year. It will be interesting to see if this marks a reversal of its outperformance which dates back to the Global Financial Crisis.



Sample portfolio for a Canadian investor

Asset class

ETF ticker

Weight

Canadian stocks

VCN

2.25%

US stocks

VUN

11.25%

Foreign stocks

VIU

9.00%

US corporate bonds

ZSU

0.00%

Canadian corporate bonds

XSH

0.00%

Global high yield bonds

MHYB

0.00%

Emerging markets bonds

ZEF

0.00%

Global real estate

TGRE

2.50%

Canadian mortgage-backed bonds

ZMBS

30.00%

Canadian government bonds

CLF

15.00%

Global government bonds

XGGB

15.00%

Gold

KILO

15.00%



Sample portfolio for a US investor

Asset class

ETF ticker

Weight

US stocks

SCHX

11.25%

Non-US stocks

SCHF

11.25%

US corporate bonds

SPIB

0.00%

Non-US corporate bonds

PICB

0.00%

US high yield bonds

SPHY

0.00%

Non-US high yield bonds

IHY

0.00%

Emerging markets bonds

VWOB

0.00%

Global real estate

REET

2.50%

US mortgage-backed bonds

MBB

30.00%

US government bonds

VGSH

15.00%

Non-US government bonds

BWZ

15.00%

Gold

GLDM

15.00%