The SMI strategies did a solid job of limiting losses during the first quarter of 2022, as the bear market we’ve anticipated since our January cover article kicked off. While most of SMI’s strategies registered small first-quarter losses, they were significantly less severe than the broader market.
Importantly, this occurred while our holdings were transitioning from a bullish market regime to a bearish one, the type of market turning point that is often the most difficult part of the cycle for our trend-following strategies. In light of that fact, it was a highly successful quarter.
Given all that has transpired in recent months — Russia’s invasion of Ukraine, record inflation, energy prices spiking, and so on — it’s easy to forget the S&P 500 index was still rising as the year began. It would register a new all-time high in early January, which meant our portfolios began the year positioned in the sectors that had been working over the bull run of the prior 18 months. The most obvious of which was large/growth stocks.
Thankfully, the SMI strategies had already picked up on declining momentum within the more speculative corners of the market, which helped us avoid the worst of the damage in smaller/growth stocks. And our bond positioning was on point as our strong tilt toward short durations and inflation protection helped immensely.