Page 42 - DIY Investor Magazine | Issue 36

Dec 2022 42
DIY Investor Magazine ·
BEGINNING TO SEE THE LIGHT: MARKETS GO UP. MARKETS GO DOWN – 2022, A YEAR IN REVIEW
For those that have followed my Brexit column on DIY Investor, and more recently Beginning to see the Light, I have a confession - Mr Bond, who provided expert commentary on all things fixed income on DIY Investor and Retail Bond Expert was actually me – writes Philip Gilbert.
So when the editor of DIY Investor asked if I could pen a retrospective of 2022 from an investment perspective, it wasn’t quite such a left-field suggestion; here goes....
Where to start? Post-Covid, Post-Brexit, Inflation at the highest levels for 40-yrs, and strikes resembling 1979 and the winter of discontent.
The big investment story this year has been the strength of the US$; that aside let’s start with everyone’s favourite, equities. The FTSE 100 hasn’t gone anywhere this year, or over the last 5yrs; however, if you timed markets correctly, you would have done well. Anyone buying off that Covid-induced dip on 20th March 2020, would now be looking at a gain of C.40%.
Of course, there are dividends to be had along the way, the current yield on the Index is C. 3.6%.
Across the pond the story with the S&P 500 is somewhat different; this year the index has fallen by C.17%. The big difference between the S&P and the FTSE comes when you extend the timeline.
Had you been invested over 5-yrs you would have made around 48%. If you had bought the dip on 20th March 2020 at 2305 your return would be C.70%.
So, what can we conclude from this. The UK really hasn’t gone anywhere for the medium-term investor; opportunists fortunate enough to call the market correctly in March 2020 would have done well.
Over the Atlantic it’s a very different story. Both the opportunist
and the medium-term investor would be pleased with their results.
The other noticeable difference is the correction the S&P has undergone this year. After 10-yrs of bull markets, and with the Fed raising rates to counter inflation, this was overdue. Markets never move in straight lines, and a correction is not a bad thing; akin to everyone catching their breath before running off.
The UK concerns me; we have the same inflation issues which, by and large the market seems ambivalent to. Unless investors are adept at timing markets the market has delivered little, which feels in-tune with the UK overall; there seems to be a general feeling of malaise, and a hard Brexit is curtailing economic growth.
Covid, inflation, and the Ukraine war are global issues; however the US has a feeling of resilience, an economy able to shake off external issues and grow. One sector that had been driving markets was tech, especially during Covid. However, year- to-date the Nadaq is down 30%; recent Q3 earnings from Alphabet, Microsoft, Meta, and Amazon have disappointed markets.
‘BUT IT’S A REAL ISSUE AND ONE THAT WILL BE PAID FOR BY EACH OF US, THE TAXPAYERS’
Moving to bonds they have also had a difficult year, but that was to be expected with interest rates rising, and central banks beginning to unwind QE.
‘THERE SEEMS TO BE A GENERAL FEELING OF MALAISE, AND
The latter is often overlooked, however the Bank of England is A HARD BREXIT IS CURTAILING ECONOMIC GROWTH’
sitting on losses of C.£7bn from the bonds it purchased as part of QE.