After a rip-roaring year in 2021, global stocks were disappointing in 2022.
No region was immune from the pain, with US, developed, and emerging markets all ending the year deep in the red. Compounding this was an equally painful fall in the value of bonds.
Each asset class responded to the fall out from the War in Ukraine and the subsequent spike in global inflation as:
- Shares had their worst year since 2008 (falling about 20%), and unusually;
- Bond prices fell significantly as well (falling about 12%).
The relative performance of value stocks (in which you hold an overweight position) was a rare bright spot and this and a strong holding of shorted dated Global Bonds, meant that clients of Brett Investment faired better than most in 2022.
“Nobody can predict the unexpected, but you can plan for the unexpected.”
Gerard O’Reilly – CEO Dimensional
With stock and bond markets falling (but at all times behaving rationally) inflation reached a four-decade high as a response to the war in Ukraine.
This ‘coupled’ behaviour (shares and bonds falling significantly at the same time) is highly unusual –so as investors you’ve just experienced quite the ride!
People have memories. Markets don’t…
One of the best things about markets is that they don’t have memories. They don’t remember what happened last week or last year. They don’t even remember what happened a minute ago. Prices change based on what’s happening right now and what people think will happen in the future.
People have memories. Markets don’t. And that’s a good thing.
So, as you start 2023, take a lesson from the market. Don’t begin this new year bogged down by what happened last year.
You also don’t need to believe in magic or be able to predict the future to have a good investment experience. Trying to see ‘patterns’ that just aren’t there is a ‘fool’s game’. Instead let’s make our decisions based on what has always worked and is backed up by Nobel prize winning research or evidence.
This way you are invested in real companies making real products being sold on to real people.
Collectively, these companies represent the dreams and hard work of people around the world. Public companies don’t just make products and services; they build business models to try to fix the world’s problems and improve people’s lives.
The stock market does not lose money, only people do…
We are committed to providing you with access to highly sophisticated low cost, globally diversified portfolios that invest you in all (or nearly all) of ‘The Great Companies of the World’ (TGCOWs).
When it comes to investing, the key is not to try to outsmart the market, but to understand how it works and use that knowledge to your advantage.
The market (TGCOWs) is a great information processing machine. It runs on human ingenuity, which is why returns tend to grow over time as people work to innovate and improve the value of the companies they work for.
So my advice is to start the new year off with a clean slate—just like markets do every day.