2022 a tough year for investors

The highly unorthodox monetary policy response to the Global Financial Crisis created a Goldilocks scenario of full employment, economic stability and stable growth, whilst behind the scenes, the pervasive effect of zero interest rates lifted asset prices to highly elevated levels.

Although inflationary pressures were building in the wake of Covid-19, the hoped for smooth transition to conventional monetary policy has been resoundingly obliterated by the side effects of the war in Ukraine; and according to Bloomberg, 2022 is turning out to be the worst year for equities and bonds combined since 1926. This is also true for our example portfolios, which are suffering their worst period of performance since inception in October 2008.

The repricing of assets may yet have further to go, so rather guessing what may lie ahead the chart below considers the past.

 

 

 

 

 

 

 

 

 

 

 

 

Please remember past performance is not a guide to the future.

Using monthly returns from our example portfolios from October 2008 until October 2022, the x-axis denotes monthly volatility and y-axis annualised returns. The chart illustrates the long-term relationship between risk and return remains intact even at times of market turbulence.