Transition
Welcome to the January 2022 edition of our Quarterly Investment Report.
This report is a compilation of the latest insights and expertise from our Independent Advisory Board.
We look forward to working with you throughout the year.
Summary of our latest insights
- If 2021 was the year of the recovery, 2022 sets itself up to be the year of the transition.
- A combination of stronger economic growth, jobs recovery and persistent inflation has forced global central banks to return interest rates to pre-pandemic levels.
- As many investors have quickly realised, transition periods are typically marked with increased uncertainty and a rise in volatility.
- Price volatility is a feature of markets, not a bug. This will continue whilst markets are caught between the tailwinds of a strong economy and headwinds of tighter monetary conditions.
- Market conditions are not unsual and occur on average every 1.6yrs, they can be healthy in reseting valuations and expectations for sustainable growth. Since 1974, only 20% of corrections to the S&P500 have led to a bear market (i.e. .20% fall in price).
- Increased volatility and price weakness present active opportunities for investors willing to remain patient and focus on long-term fundamentals.
- The main risk to the outlook is a policy mistake by central bankers, further covid related disruption and geopolitical tensions. Central bankers appear to be walking a tightrope, with the potential for a policy error at each side.
- The Advisory Board have been discussing the risk of higher inflation and rates for sometime, re-positioning client portfolios throughout 2021. This has offered some reative protection during the recent downturn, most notably through an overweight to Alternative assets that have a low correlation (sensitivity) to equity and bond markets.
More detail on our views and latest positioning can be found here.