June was an extremely difficult month for the market as the S&P 500 lost 8.25%, resulting in a 20% decline year to date and the worst first half of the year in over 50 years. The Nasdaq 100 declined 9% for the month for its worst first half of the year ever. The market experienced the bulk of its loss for the month in the first two weeks. It then had a rally only to fall back into month end. The U.S. dollar strengthened which exacerbated losses in overseas markets.
Continuing elevated inflation levels and rising interest rates provided headwinds for risk assets. The Consumer Price Index (CPI) rose 8.6% year over year ending in May. Core inflation rose at a 6% rate. Finally, the war in Ukraine continues to grind on and has contributed to inflation in areas such as wheat and energy. Workers have been pushing back against the rising cost of living and there have been signs of success against wage inflation. The Federal Reserve continued its efforts to tame inflation by raising short-term rates by 0.75%. This followed a 0.50% increase in May and was the largest one-month rate increase in 28 years.
Our models performed well during the month with the Diversified Portfolio gaining 5.53% bringing year to date returns to just over 14%. We were pleased that our strategy held up so well in the face of a large decline in the markets we trade. We were able to make money on both the long and short sides of the market demonstrating the nimble nature of our short-term trading style. Our longer-term hybrid momentum model performed very well maintaining a short bias for the vast majority of the month, while our counter-trend model generated modest losses. Finally, our relative value model was basically flat, remaining in cash for the bulk of the month. Regardless the Diversified Portfolio not only protected principal during a month where capital preservation was paramount, it produced the welcome relief of positive returns.