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Portfolio Update – May 2022

Contents of this month’s post include:

  • Market Update of the current economic regime
  • Monthly Portfolio Update for May 2022 with a fresh set of charts

Welcome to a brand new All Seasons Portfolio monthly update, this time for the month of May!

Within just a few days, on 15 June, the Fed will be announcing the size of its next rate hike, and per the time of writing, the market is pricing in a 92% probability of a 50bps hike, with an 8% probability of an even higher hike of 75bps. You can check out this handy Fed Rate Monitor Tool from that shows rate change probabilities for the next 10 meetings based on the futures market prices.

While the Fed funds rate will be an important driver of returns of bonds and stocks, the more interesting data to look out for is the May inflation number which will be published already tomorrow on 10 June, as inflation is what provokes the Fed to raise rates. The next few inflation prints will weigh a tonne in determining the direction of markets in the next few months as sustainably elevated numbers lead to further aggressive rate hikes, while slowing inflation would give us a more lenient Fed, which would cause stocks and bonds to recover. In other words, there is a substantial amount of uncertainty in the cards over the summer, and a portfolio should be properly prepared.

But before we get into the detailed run through of my portfolio and the performance of the asset classes of the All Seasons Portfolio, let us have a look at the key economic indicators that are the main drivers of price movements.

May 2022 Market Update

As a reminder, more or less all market moves can be traced back to essentially two forces: inflation and economic growth, and especially positive and negative changes in expectations of these.

That gives rise to four possible market regimes, as a combination of the two factors can be summarized by a matrix of four squares with inflation and economic growth on on axis each. The four possible regimes are this inflationary stagnation, inflationary boom, deflationary bust, and disinflationary boom.

Image curtesy of Resolve Asset Management

That will serve as a backdrop for the next section which will cover a brief summary on the current market regime and where we might be heading.

In what market regime are we now? Translating the above chart into real life, I will be showing a similar chart with only the matrix, and plotting the development of historic inflation and economic growth to show the current regime. I’ll also be doing the same exercise with forward-looking indicators, showing market expectations.

The inflation rate in the US was reported for April (published 12 May) was 8.3% YoY, which is slightly below the March number of 8.5%, but still high regardless of base effects from last year. Some economists believe, however, that inflation has peaked, as smoothed six-month core PCE prices index is in a downward trend since January.

Source: @EPBResearch

As for economic growth, the second estimate for Q1 GDP growth in the US was published in May (final Q1 numbers confirmed late June). The number did not bring comfort to the market for avoiding a recession, as the current QoQ growth rate was -1.5% (down from initial estimate of -1.4%). A stagflationary environment thus seems more likely, with the US possibly slipping into recession if the Q2 growth rate remains negative. The rolling 3m GDP real growth rate came in at 2.37%, and is clearly falling.

From the charts below, you will find clearly that both inflation and real growth rate are in clear trends. Inflation is increasing to 7.9% annualy in March, while growth is falling, but we are not yet in a stagflationary environment, which would require growth to be negative.

For the forward-looking chart (the one to the right), I am using 5Y break evens (being the difference in return of a 5Y nominal US Treasury Bond and a 5Y Inflation-Linked US Treasury Bond, aka. TIPS) to illustrate expected future inflation, and PMI (Purchasing Managers’ Index) as a leading indicator for economic growth (note that for PMI, 2 points above 50 roughly translates to 1 percentage point in GDP growth for the US).

Translated into words, we can see that the market expects inflation came off recent highs, but is still elevated, even though also the breakeven is a rather reactive or lagging indicator as it is usually adjusted after changes in realized inflation (higher inflation prints cause higher inflation expectations).

As for growth, purchasing managers in the manufacturing sector remains in a declining trend, but was fairly stable in May.

The next two charts depict the trend in historical inflation and growth, as well as forward-looking expectations. Each data points are measuring the difference between the latest number and average of the previous 12 data points, where the larger dots being the latest numbers (the yellow diamond being the last measure).

Inflation is still in a positive trend as the plots are in the upper half of the matrices, but corresponding to the chart further up from EPBResearch, the strength of the trend is declining. While that chart used a 6-month smoothed core PCE, and the below chart depicts the latest print against a 12m average, they tell a similar story that inflation is not rising as fast at it has done. However, when considering growth rate, the declining trend is still clear.

A similar story is told by forward-looking expectations, as inflation is expected to continue to rise, and growth will continue to decline.

These data support the current market sentiment. Inflation continues to remain elevated, while growth – previously strong on the back of Covid-19 – has begun show clear signs of slowing. We are thus taking steps toward entering the inflationary bust quadrant, while not being there quite yet.

But depending on the definition of “stagnation”, whether that requires negative growth or a stagnating (but barely positive) growth of less than 1%, some argue that we are already in a stagflationary environment. The latter definition is for example used by the esteemed In Gold We Trust report.

A lot now depends on the next few Fed meetings and the coming months’ inflation and growth numbers. If inflation starts to decline and actually turns out to be transitory (which the trend in inflation might suggest), that could cause lesser need for much tighter central bank policy, which in turn would be good for both stocks and bonds. However, if inflation persists at higher levels, the Fed would be more hawkish, which is likely to cause continuing decline for stocks and rising rates after the pause we have now seen the past couple of weeks. Exciting times ahead, in other words, and it pays to be diversified with other assets as well.

In this environment, one would expect commodities, inflation-linked bonds and VIX to outperform – the latter only in if the declines of the stock market turn more violent rather than the orderly sell-off we have seen so far. This is also the case in real life (see portfolio update further below).


Interpreting all charts above, we now have a good understanding of the current environment. Let’s therefore continue to look at my All Seasons Portfolio to see whether theory translates to reality.

And before we jump that, remember to leave your feedback for this format; if it is worthwhile and what other info/data you would find to be relevant.

If you are looking for getting started with your own All Seasons Portfolio and need some inspiration, check out my post on How to get started with the All Seasons Portfolio strategy. While stocks have been a great investment the last decade, there are no guarantees that this trend will last, as their continued success depends on several factors. Instead, consider diversifying your portfolio to include other asset classes, and benefit from the rebalancing period over the long-term, as described in this article.

May 2022 Portfolio Update

As has been the case for most of the year so far, the narrative from the above set of charts of the prevailing economic regime is well aligned with what asset classes outperform in the current environment.

The sole outperformer this month was again commodities, which rose broadly, with rising energy prices, after a pause since the end of February rally in crude, but also with increasing agricultural commodity prices.

Rising agricultural commodity prices can be explained by two factors. The first, and most obvious, is the unavailability of Ukrainian and Russian grains on the world market due to the Russian invasion. This is already causing severe distress in numerous developing and undeveloped economies such as Ethiopia and Sri Lanka which are at high risk of famine due to lack of food, as the effects of the war is combined with a draught. The low food supply pushes up prices, and bread prices have already increased by up to 50% in parts of Africa, as reported by Italian news house Rai News in May.

The second factor is a rainy spring in the US which has delayed the planting season by several weeks for vital crops corn, wheat and soybeans in several key agricultural states, with record low planting completion ratios. Usually, most crops are in the ground by end of May, that target was way off this year. While the situation is improving, the risk of lower crop yields increase with delays, which could lead to lower supplies in the autumn. I published a short piece about this topic already last week, where you can find a bit more details: Delayed Planting Season in the U.S. Threatens Crop Yield.

In other words, the upward pressures on commodity prices are not isolated to energies, but are broader, why commodity exposure is a good hedge for potential increased costs of living and protecting your purchasing power during these inflationary times.

On top of rising inflation, recession fears are ever present among investors, as a stagflationary scenario becoming increasingly likely. The Q1 real GDP growth was negative (-1.5% indicatively) in the US quarter on quarter, where it is difficult to see any end of the stagnation. This will have material impact on portfolios going forward, so let’s take a look at what has bee going on in my accounts this last month.

If we start with my eToro portfolio, which is an All Seasons Portfolio that is levered 1.34x times, the performance over the month was trading somewhat down over the month, as few asset classes managed to stay in positive return territory.

Below you find the summary of my eToro portfolio over February and the performance of each asset class in my portfolio. Despite the overall volatility, my portfolio was anyway quite stable.

My eToro portfolio @AllSeasonsPort over May 2022

Here below is also a waterfall chart of how each asset class contributed to the monthly return. As the weight of each asset is different, their returns will of course have different impact on the total portfolio return, and this is a good way of visualizing it.

While crypto had a horrendous month, with Ethereum declining almost 40% and Bitcoin returning about -20%, thanks to its low allocation (less than 3%, which is below the aimed level), the total impact on the portfolio was acceptable, given how violent the drawdown was. Besides this line item, most other asset classes decline by about 0.3%, except inflation-biases assets of commodities and carbon credits.

Return contribution of each asset class to my eToro portfolio in May 2022, which takes into account daily weights and returns of each asset.

If you are already on eToro, make sure to follow me there too, as I from time to time share brief updates there directly about that particular portfolio. The updates I share on this blog will however remain deeper and more insightful.

Follow me there by finding user Allseasonsport. And feel free to copy my portfolio there with a small amount of your portfolio if you want a more hands-off approach to risk parity investing. I do all my trading there in a systematic and rule-based manner, and already have 17 copiers at the time of writing. I very much like this copy investing functionality, as it makes it easier to follow other people’s strategies, while the investors like myself that are copied have skin in the game as all trades are done with my own money.


Trade stocks, crypto and ETFs listed on 14 exchanges on eToro. You can copy my portfolio by searching for user Allseasonsport

As for my DEGIRO All Seasons Portfolio, May was even worse, with a loss of 3.5%.

The worst performing assets were found on the inflation-linked bond side, with both American and European longer tenor TIPS declining more than 7% as yields continued to rise over the month and inflation expectations coming down a bit to 2.70% from 2.92% a month prior (see the chart in the first part of this article).

And as mentioned in last month’s update, in the current inflationary environment with long-term (nominal) government bonds being in a negative trend, I have shifted more of the 55% allocation from nominal bonds to inflation-linked bonds. While this was not a winning strategy when looking at May in isolation, the broader balance between these bond types should prove to be a better hedge against the prevailing inflation uncertainty, preparing my portfolio for any outcome in coming months in both the US and Europe.

I remain overweight in commodities, and have also in the beginning of June added to the gold position, balancing this to the aimed allocation.

The broad losses across most asset classes, especially in those not included in a typical 60/40 portfolio (such as TIPS, gold, and heavier bond allocation to longer-term treasury bonds) have meant that the portfolio has slipped behind both the S&P 500 and a 60/40 Portfolio over the past three months. This was mainly due to the bounce in US stocks in the last days of May, as just before that, my All Seasons Portfolio was at par with both benchmarks.

Looking at individual assets, commodities were the only bright spot this month. I am not sure whether the cryptocurrency line in this chart shows correctly and will have to review the data, as it looks like it only catches the last three weeks while a big drop in this asset class was recorded during the first week of May (compare with the next chart for the 3M return of each asset).

Next follows the 3-month chart below for each ETF, there has been an increasing divergence between asset classes with the inflation-hedges on top. Also the global multi-strategy stock ETF in JPGL has held up quite well during a period of sell-offs in major indices (S&P 500 and Nasdaq to name a few). This is a pleasant outcome, as this added stability is what I sought when adding this ETF a few months ago.

Lastly, as usual, here is the table of my ETFs and the changes laid out in table form.

ETFNameAsset Class2022-04-302022-05-31Change (Hold)Change (ETF)
UIMBUBS LFS Bloomberg TIPS 10+ UCI ETF(USD)AdTIPS€955.02€883.74-7.46%-7.46%
FRC4UBS LFS-Blmbrg Eur InflLnk10+ UCIT ETF(EUR)AdTIPS€682.62€630.54-7.63%-7.63%
DTLEiShares $ Treasury Bd 20+yr UCITS ETF EUR Hgd DistLT Treasury Bonds€639.45€629.16-1.61%-1.61%
DBXGXtrackers II Eurozone Gov Bond 25+ UCITS ETF 1CLT Treasury Bonds€690.16€658.62-4.57%-4.57%
3TYLWisdomtree Us Treasuries 10Y 3X Daily LeLT Treasury Bonds€278.13€278.250.04%0.04%
M9SAMarket Access Rogers Int Com Index UCITS ETFCommodities€592.20€600.121.34%1.34%
JPGLJPM Global Equity Multi-Factor UCITS ETF - USD accStocks€2,125.71€2,104.31-1.01%-1.01%
VOOLLyxor S&P 500 VIX Futures Enhcd Roll UCITS ETF AVIX€33.20€32.50-2.11%-2.11%
Currency:BTCUSDBitcoin XBTCrypto€183.01€147.14-19.60%-19.60%
Cash Position€0.00€0.00

By the way, this could also be a good time to mention that I have recently started a Wikifolio profile, where I also will be managing an All Seasons Portfolio. is, similar to eToro, a social trading platform but where you can track portfolio via regular brokers (currently brokers with activity in Germany, Austria and Switzerland such as 1882direkt) by investing in certificates listed on Börse Stuttgart (one of Germany’s major stock markets) and issued by Wikifolio’s partner Lang & Schwarz. I have already launched an Optimal Commodity Strategy that you can make a reservation for by registering and searching for my profile RiskParityNick.

Thank you yet again for following my blog about risk parity investing and the All Seasons Portfolio. If you haven’t done so already, make sure to subscribe to the newsletter via the form in the page footer, and to drop any comments you may have on the content with the comment section or via email to The greatest value I have received from upkeeping this blog is the fantastic conversations with great people, such as yourselves, about ideas on investing and strategies. Thanks for that!

If you wish to support me in alternative ways without donations, you can share the post through social media or with your friends and family who you think should allocate their funds in a more responsible and balanced way across asset classes.

We’ll catch up soon for the next update!
Nicholas Ahonen

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