How do we characterize the performance of the various asset classes in 2022? Awful.
In 2022, the S&P 500’s fourth largest calendar year loss since 1940, 1 a widespread decline in global equity prices, and a fixed income market correction provided one of the toughest investing backdrops investors this generation have experienced.
It was a year driven by high starting valuations across the asset classes, unexpectedly strong consumer price inflation, and a pronounced global monetary tightening cycle. War breaking out in the Ukraine did not help. Nor did worries about the global economy and corporate cash flow as the year progressed. 2022 did not provide investors with any favors.
Bonds fared poorly right across the fixed-income landscape. Longer-dated bonds meaningfully underperformed the broad fixed income benchmarks.
Physical commodities, as a group, generated positive returns in 2022. Natural gas, nickel, and food-related commodities were the clear winners for the year.
U.S. labour market has remained especially resilient, growth is still slowing, and a variety of risks remain including the delayed economic impact of higher interest rates, structural headwinds in China and the ongoing war in Ukraine. With inflation on its way down, banks may be able to raise interest rates at a slower pace or even pause rate hikes altogether.
Financial markets are much more attractively priced than they were a year ago and that both stocks and bonds therefore offer improved return potential. Interest rates have risen meaningfully and are now at levels where bonds should offer greater reward against a downturn in stocks within a balanced portfolio.
Equities could encounter volatility in the near term if recession concerns intensify or inflation reasserts itself.
2022 has been a challenging year for financial markets, but there are opportunities for investors who remain vigilant and disciplined. We believe that with the right strategy and a focus on the long term, investors can achieve their financial goals even in the face of uncertainty and volatility. One item you can count on is that Penmore Wealth Management, iA Private Wealth will stick to its disciplined and effective methodology to guide you to your goals.
Penmore Wealth Management, iA Private Wealth
This information has been prepared by Roland Orban who is a Portfolio Manager for iA Private Wealth Inc. and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Portfolio Manager can open accounts only in the provinces in which they are registered. iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates.
Roland Orban, CIM, PFP, Investment Advisor
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