[Music]

so it's a brand new year 2022 has

arrived

time really flies so i'd like to start

by wishing you a very happy very

successful and very profitable year

ahead and before we get into the market

analysis let's begin with the year in

review what happened in 2021 what can we

learn from it and what should we expect

in 2022

so starting off with the u.s markets the

s p 500 the main index of the u.s

closed the year at 26.89 percent

which is a very very high return

historically so as you guys know

historically in the last

100 years the snp typically returns on

average

about eight to ten percent a year so 26

is really

way above

more than two standard deviations above

the mean so it was a very very bullish

year

so what drove the market in 2021 well

number one was again very low interest

rates um and interest rates were slashed

during the covet pandemic of 2020 so

interest rates remain really low and

near zero percent number two was strong

earnings growth although the growth was

off a very low base in 2020 so for

example in quarter one

the

s p 500 companies their earnings

in total grew 52.8 percent quarter two

earnings great 92

quarter three earnings grew at 39.9

percent and of course quarter four is

not out yet you'll be

uh reported uh later this month right as

far as the overall economy was concerned

economy grew

of course helped by a lot of the

fiscal and monetary stimulus by the u.s

government

quarter one we had real gdp growth of

six point three percent

quarter two six point seven percent and

quarter three two point three percent

and throughout the entire year the s p

500 remain on a very very clear uptrend

as you can see the 50 moving average

remained above the 150

the blue line above the green line and

prices remain above the 200 moving

average so throughout the entire year

the the bull run the uptrend was very

much intact and it was a no-brainer

simply buying on the dip you always want

to buy it on a dip when the uptrend is

very very clear now we had a total of

about 10

corrections during this

uptrend in 2021

uh so more than usual but the

corrections were very minor corrections

most of the corrections were under five

percent so we had the first correction

the second one the third one

the fourth the fifth the sixth the

seventh the eighth correction was a bit

bigger that was about like

um over five percent but still less than

ten percent correction then we had the

uh ninth correction and the last

correction happened somewhere in october

and of course

you know what caused the correction is

not really important because we know

that markets don't go on a straight line

they always go through wave up wave down

wave up wave down but if you read the

news headlines you get freaked out

because they'll give you all the reasons

why the market went down which is not

important the important thing is when it

goes down to support you just add shares

very simple but you can see these were

the news headlines that dominated 2021

so the first major correction over here

started because um

uh of soaring treasury yields where

yields went

uh from below one percent the 10-year

treasury yield went to 1.75 so that

freaked people out and caused a big uh

sell-off in the tax stocks and then you

had

a very hot inflation inflation rising

above uh 4.5 at this point and then we

had the fed beginning to say hey you

know what we're gonna start tapering our

bond purchases we're gonna start

reducing the quantitative easing or the

money printing and then we had the delta

variant somewhere in

july

and then we had the evergrand

crisis from china and then we had

another inflation scare

back in october where inflation went

um above five percent

and we had another one where again

omicron dominated the headline so you

know every year you always have bad news

and instead of getting freaked out and

getting worried the bad news is the best

time to add shares when prices retrace

to support levels

so let's take a closer look at where the

this gain

has mainly come from

so breaking down the s p 500 into its

sectors

you can see that for 2021 the best

performing sector

was energy

the energy sector which gained 36

the second best sector

uh was real estate

that gained 28.1

and you guys know that in my portfolio

i've got zero exposure

to energy and real estate okay

why because

in the long run

energy and real estate they tend to

underperform the s p 500 because most of

the companies

in these two sectors they tend to be

very competitive right in the energy

sector there are many many

uh companies competing same thing in

real estate so with high competition you

have got low profit margins

these companies are very cyclical uh

cash flows and revenues are not very

predictable

and so i tend to avoid these two sectors

because again in the long run you can

see for example over the last five years

if you take a longer term time frame

real estate and energy tend to

underperform the overall market

but they were the best performance in

2021

because they were the worst performers

in 2020 right because of the covet

pandemic

so in other words the reason they did so

well in 2021 was because they were

merely rebounding and recovering

from really really crappy

low bases in 2020

all right so you can see that again a

lot of the gains came from these two

sectors that were recovering now

technology which again most of my stocks

and technology companies the profitable

ones there was that the third best

performer followed by financials

communication services industrials basic

materials and so and so forth

so the ones in red are basically the

sectors which i am more heavily invested

in so my portfolio consists as you guys

know mainly in technology

uh financial services communications

health

health can consumer cyclicals or

consumer discretionary

because in the long run these are the

sectors that tend to outperform the

market because

the companies tend to have higher profit

margins they tend to be in secular

growth industries

and they tend to have stronger economic

modes

now what is interesting to note is that

if you look at the s p 500 it's made up

of 500 companies

now

the 500 companies are not equal in size

uh we call it the market cap and you can

see that in the s p 500

about 22

or close to 23 of the s p 500 is made up

of only five companies these five

companies are so huge

they make up

23 of the whole s p 500 in terms of the

weightage

so what are the five companies you've

got apple

microsoft alphabet amazon and meta okay

and uh out of all this you know that i

own all of them except apple which i

want to own but it's been too expensive

for me to add shares but once shares get

cheap hopefully i want to get back to

apple as well all right so a lot of it

is again driven

uh by these companies so mainly what

drove the s p 500 for 2021 was energy

real estate and the rest of it were

these five companies and that's it so

that's what mainly drove the smp so

here's the thing

in your portfolio if you don't own these

five companies

if you don't own energy and real estate

chances are you did not get much gains

in 2021 because most of the gains again

came from those sectors

how did the other indexes do

so the snp gained 26.9 percent the

nasdaq which usually outperforms the snp

rarely

for this year it underperformed the s p

because again uh tax stocks did not grow

as much as the

cyclical stocks that were rebounding off

that weak base energy and real estate

and financials right so the nasdaq

gained 21

and the dow

gained 18.7 percent but again all three

indexes ended the year with double digit

returns which are very bullish

nonetheless

um

if you again take a look at the sectors

these are the exact percentage gains

energy gained 47

uh real estate gain 42 percent followed

by uh technology 33

financials 32

uh materials 25 and so on and so forth

right the russell 2000 which measures

the small cap companies small companies

gain 13 so another interesting

thing uh

is that for

small caps have been underperforming

large caps in the last year or so all

right so there's a bit of a divergence

so i expect that in the next year or so

small caps

may catch up to large caps so could look

at the small cap etf uh which you guys

know that i've been looking at it as

well

now china china really underperformed in

2021

uh the hang seng index

that has most of the

chinese tech stocks at alibaba and jdn

and mate one uh lost 6.81

for 2021 and again uh it currently

remains on the downtrend so downtrend

chances are we're gonna keep going down

until we see a reversal in the

okay

the mainland chinese stocks have been a

lot stronger now before that again

although

you can see the hang seng on the daily

candles

remain on a downtrend so it's still

bearish short term but again if you take

a look at the longer term chart

on monthly candles

you can see that

right this is the big uh drawdown that

we had in 2020 2021 we still

are above this very strong support

at the 200 moving average on monthly

candles so there's a pretty good chance

that although short term we are still

bearish we're still on a downtrend on

the hang seng

but if this support holds

and again we've got policy changes from

the chinese government because a lot of

it is driven by

the sentiment

from the government right because again

fundamentally the chinese stocks are

cheap they are really really cheap but

again doesn't matter how cheap they can

get cheaper

if sentiment continues to be bearish

okay but once sentiment changes it will

change eventually

it will change eventually the question

is when no one knows when but once it

changes

you're going to get a pretty strong

rebound

back

up all right so a lot of gains to be

made but you need patience you need to

be patient to wait for that sentiment to

shift

now in terms of the mainland china

shares we're looking at the shanghai

composite index

interestingly enough it's not been

hit as hard by the

government intervention

so it still clocked the year up 4.7

although again it's very low relative to

the u.s markets of double-digit gains

and again china had a lot of problems

this year or last year right yet the

evergreen crisis you had

the energy crisis

uh you had the chinese government crack

down you had a lot of things that were

not going their way you had to slow down

in consumer

spending right

so despite all that the the shanghai

remain on an uptrend clocked 4.7 percent

uh for 2021.

so how did i do my main us portfolio

gained

23.62 percent

for the year

and uh you can see that my biggest

drawdown

for the year

was

13.04

that was i think somewhere in march

during the march sell-off the 13

sell-off here right so you can see that

the blue line

is the s p 500 and the green line is my

portfolio

performance and so you can see that for

this year i underperformed the s p 500

but i outperformed the dow jones and the

nasdaq and the chinese markets right you

may say that's not very good well it's

okay i can't really complain um so

what's the reason i i underperformed the

s p 500 this year

there are two main reasons the first

reason is because as you guys know 20

of my portfolio are in chinese stocks

and the chinese stocks i bought the tech

stocks mainly went down 30 40

so that really dragged down the

performance of my portfolio and that's

the first reason second reason is

because

again i've got zero exposure to energy

and real estate stocks and because these

two stocks were the

uh best performing sectors in 2021 and i

had no exposure to those two sectors

and hence that's why i underperformed

the s p 500.

so in the short term there's no way to

predict which sectors will be very

bullish and which sectors will be

bearish

on any given year and which markets will

outperform and which markets will

underperform like you know i had no idea

that china would

underperform

in 2021 i had no idea that the chinese

stocks i bought would be whacked by all

these negative sentiments i had no idea

that energy and real estate would be the

best performance so again understand

that as an investor

no matter how good you are you can't

predict the short-term price movement

you can't predict for certainty which

ones would go up and which ones to go

down in the short term but again as

investors that's not our job our job

again is not to predict the short-term

direction of the stock market or of

individual stocks because we can't we

can't predict for certainty

our job is to just ensure that

we keep

buying and adding great companies that

are undervalued as long as you hold

great companies that are undervalued

over the long run you will beat the

market so for example you can see that

in the last three years which is a

longer

horizon

um i got a 162 percent return which is

this blue line

versus the

s p 500 so very confident that i'll

continue to be the s p

over the long run but again in the short

term anything can happen so we'll see

what happens in 2022 fingers crossed if

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markets be with you