ASX shares across the different sectors have delivered wildly different outcomes so far in 2022.
Here's what we mean.
Since the opening bell on 4 January, ASX shares, as measured by the All Ordinaries Index (ASX: XAO), are down 4.64%.
That's not great. But it sure beats the 18.2% year-to-date losses posted by the S&P/ASX All Technology Index (ASX: XTX).
On the flip side of the coin, and helping support the All Ords in 2022, are energy shares. As witnessed by the 17.9% gain in the S&P/ASX 200 Energy Index (ASX: XEJ).
ASX shares in the resource and commodity space have done well also.
And the gold miners have handily outperformed, with the S&P/ASX All Ordinaries Gold Index (ASX: XGD) up 6.6% so far this year.
And all of this has come as global uncertainty has soared.
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Fast rising interest rates and a European war roil ASX shares
Early in the New Year, investors in ASX shares came to grips with the reality that rising inflation rates weren't so transitory after all. Meaning interest rate hikes from the Reserve Bank of Australia were likely to come. And come significantly sooner than the central bank had forecast just last year.
Then the world was left in shock by Russia's brutal invasion of neighbouring Ukraine.
Uncertainties around the duration and scale of Russia's war have not diminished since its troops crossed the border.
Meanwhile, investors in ASX shares are still faced with how interest rate hikes will impact their holdings.
With that in mind, The Motley Fool turned to Josh Gilbert, market analyst at multi-asset investment platform eToro, for his take on how investors can hedge their portfolios in these highly uncertain times.
Gold, commodities, oil and Big Tech
Addressing the heightened risks facing investors in ASX shares and global equities, Gilbert told us:
Commodities are the obvious asset of choice when planning to hedge a portfolio against imposed risks.
In times of uncertainty, gold is the first asset investors generally turn to as it's been used for decades as a store of value and tends to perform well in volatile markets. On top of this, oil has been an asset class that investors are rotating into, given its tight supply and high demand.
Atop commodities, Gilbert also said that investors could consider other cyclical assets, like value stocks, to hedge their portfolios.
"These assets tend to be the most sensitive to economies re-opening, yet still have strong GDP growth and will likely ride out waves of uncertainty," he said.
While technology shares have broadly taken a beating in 2022 (not just ASX tech shares, the United States NASDAQ is down 12.3% this year too), Gilbert said the biggest players in this space could offer investors some defensive hedging.
According to Gilbert:
We also see Big Tech as the 'new defensives'. These are companies that have dominant market positions, strong growth, high margins and fortress balance sheets.
While many Big Tech stocks often have high valuations, investors are beginning to see them as 'all-weather' assets that can successfully navigate whatever the Federal Reserve, the economy, or geopolitical tensions throw at them.
