What a year it’s been thus far and we’re only halfway through 2022…whew! If you’ve been following the broader markets this year you’ve seen how tumultuous things can get when the Fed reigns in its easy monetary policy. Over the past couple of years, we have seen unprecedented policies from the Fed in the face of the global pandemic. They have essentially turned on the spigots of free money in the form of historically low interest rates and quantitative easing (that’s a whole other conversation). We all knew at some point the music must stop as the unintended consequences can be quite dire from such policy. If you study economic history, you’ll understand that type of accommodative policy is how bubbles are created. I won’t delve too much into that, but we’ve all seen what the housing market did this past year along with new record highs in the stock market. Well, remember those unintended consequences I just mentioned? Sadly, they’re front and center now with inflation rates we have not seen in decades along with the worst stock performance in the first half of the year in over 50yrs. Yes, 50 years! The S&P 500 closed down -20.82% at the halfway mark on the year. Ugly! The QQQ which is an ETF representing the Nasdaq finished down -30.08%. Those precious high flying tech growth stocks…..even worse.
ARKK -57.38% (OUCH)
After finishing up +2.41% for June, we managed to outperform just about everything out there with +12.16% YTD returns. That’s a significant outperformance for which I’m proud of but not quite satisfied. We can always do better and that quest for higher alpha (risk adjusted returns) never ends. Despite the outperformance over the past 6 months, we still had to navigate some challenges. We recently relocated and established an office Salt Lake City, UT which was a feat of its own. With the office relocation, we’ve also made significant investments in upgrading our trading systems and servers which will allow for faster execution and a significant increase in computing power. We have also added some serious talent to our team with the addition of two data scientists based out of Austin, TX, one of which is a PhD in applied mathematics. Also, we’ve also recently brought on a former director of the CME (Chicago Mercantile Exchange) who has been in the business since 1980 to help us build out architecture around market nanostructures, something that takes a high degree of expertise with how the CME’s data center processes orders through its matching engine algorithms. With all of that said and now that the office here in Salt Lake is now fully functional, I’m anticipating a much stronger second half of the year than the first. I usually refrain from setting upside goals but with all the positive things happening here I believe finishing 2022 north of +30% is certainly achievable. As always though, nothing is guaranteed, and our primary focus remains strictly on managing risk.
I hope everyone is healthy and happy and wish you all a happy and safe Independence Day.