This year saw investors suffer the worst start to a calendar year in 5 decades.
The rough year that investors have had to endure is a product of surging inflation, central banks rapidly increasing interest rates at the fastest pace since 1994, the US dollar rising significantly, the war in Ukraine and the ongoing supply chain issues from Covid shutdowns according to Chief Economist at AMP, Shane Oliver.
From their highs of late 2021, US and global share markets fell around 25% and Australian share market declined around 16%. Bonds, which are normally a source of stability in the face of share market falls, suffered their biggest losses in decades as rising inflation pushed yields up.
What’s the good news?
From the recent lows, global and Australian share markets are up 10% or so.
US inflation appears to be easing. Headline inflation has dropped from 9.1% in June to 7.7% in October.
Central banks are starting to slow the pace of interest rate rises.
Australian inflation should start to decline in early 2023.
China is focusing on boosting its economy.
What remains a concern?
Inflation could surge or remain stubbornly high requiring additional rate rises.
Conflict in Russia, the middle east, China or elsewhere could eventuate.
While it may be too early to call a bottom to markets and volatility is likely to remain high, the likely peak in inflation in the US and rate of interest rate rises slowing adds confidence for investors over the next 12 months.
As always, a long term investment view and a diversified portfolio are keys to successful investing. If you have concerns, please contact the team at Magnify Wealth 07 4688 8000.