Welcome to 2023, a year in which most investors will surely hope the worst has ended. Looking back at last year, the figures make for grim reading.
This week, Anthony Luzio highlighted the best- and worst-performing funds and sectors of 2022, although in truth there was far more of the latter than the former.
Indeed, unless investors backed Turkish equities or oil stocks, it was a sea of red, with far more Investment Association sectors making double-digit losses than double-digit gains. The same was true in the investment trust sector.
To make matters worse, the list of individual losers included the likes of Scottish Mortgage, Baillie Gifford American and Morgan Stanley US Growth, which still hold billions of pounds worth of investors’ cash despite halving in size in 2022, while the gainers tended to be niche funds that fewer people will have backed.
One ray of hope that investors thought might take place was the Santa rally, but as Gary Jackson wrote, there was little respite in December as the big man rally failed to deliver. Experts had suggested that the usually cheerful festive mood would improve markets a bit before the end of the year.
Jackson’s article telling investors where they should have invested in 2022 could have been an incredibly short read. However, one interesting thing that came from last year is that UK investors were spared the worst of the falls through currency, as the pound strengthened – at least there was one silver lining.
Turning to stocks, this is where investors could really have made some money. Value stocks and oil majors performed well, while there were also impressive returns for some smaller companies, as Jonathan Jones reported.
However, getting it wrong was costly, with FTSE 100 names such as online grocery delivery firm Ocado and housebuilder Persimmon more than halving in 2022.
So will 2023 be any different? From conversations with fund managers this week, it seems as though there is pessimism for much of the year.
Indeed, there are expectations that most major economies will enter recession this year, although how deep and how long this will go on for remains to be seen and is largely dependent on central banks. The more they continue to raise interest rates to combat inflation, the worse the recession will be.
Of course, most will tell you to invest for the long term and not to worry about short-term wobbles. Indeed, the falls of 2008 look unspectacular now after a decade of strong returns.
Hunkering down in cautious portfolios is one way to ride out the storm, particularly as bonds (the asset class used to combat stock market volatility) now offer attractive yields for the first time in more than a decade.
Some will even argue that now is a great time to get invested in the stock market, with share prices so cheap that they must surely rebound from here?
However you invest, I wish you a more prosperous year than in 2022. As ever, Trustnet will continue to highlight the best and worst, bring new ideas and find out from the managers themselves how they intend to face challenges.