Here’s the report card on capital market asset classes for 2022:
What worked: very, very little. Oil (either flavor, brent or WTI), energy equities, MLPs, and silver was up modestly. Gold (allegedly the inflation hedge) was flat in the fastest inflation environment in 50 years.
Most major equity markets (including the SP500) were down in the range of 15-22%. Russia was down -36% before it basically closed/was shuttered.
Bitcoin, crypto, and the final days of FTX all indicative of the end of the zero-interest rate era. Speculation, in all forms, has been extinguished/eliminated/crushed.
In my mind, the story of the year isn’t stock volatility, it’s bond volatility. The US Treasury market just put in its worst performance year since 1789 (that is not a typo). US Treasuries down -15%, Barclays aggregate bond index down -15%, Italian BTPs down -22%, German bunds down -33%, UK Gilts down -33%. In the past 40 years, there has never been another year in which BOTH stocks and bonds got hammered. That lower left-hand corner in the chart below speaks for itself. It’s the lonely, sad quadrant.
Amid volatility, opportunity presents itself. We’ll be out with our list of opportunities and themes this week.
Source: Bloomberg and EISI as of January 1, 2023
Richard Barrett
Chief Investment Officer
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