From an investment perspective 2022 was a tough year. Global markets fell in January and spent the rest of the year in negative territory against the backdrop of higher inflation, the war in Ukraine and a cost of living crisis.
With even the traditionally more cautious classes such as gilts, corporate bonds and property suffering sharp falls, it is no surprise therefore that all client portfolios fell in value.
The one bright spot for the year was the FTSE 100 which benefited from its higher exposure to oil, financial and mining companies.
It’s easy to get caught up in all the doom and gloom around the economic outlook, but markets are forward looking and we are getting closer to the turning point and the start of a new bull market.
A bull market is a period of rising share prices defined when values have risen by more than 20%. A bear market is the opposite and is what we have been in for over a year now. Bear markets are always followed by bull markets. Bear markets on average last around a year and a half whereas bull markets last for 5-6 years.
The foundations for a market recovery are already in place with inflation appearing to have peaked both in the US and the UK. There may be further volatility to come (both up and down) in the first half of this year as the impact of higher interest rates and inflation on corporate earnings become clearer along with China’s ability to deal with its Covid related challenges.
However, there is very good reason to believe that by the time we get to summer, the outlook has significantly improved and this reflects in asset values.
So, whilst we have no crystal ball, it is our view that we will end the year in a better place with portfolio values looking healthier. This will then hopefully be the start of a long period of rising values, and time for the bear to have an extended hibernation!
As ever, if you have any questions, please do not hesitate to contact your adviser.
The Wealth Management Team