All good things must come to an end
Investors over the past ten years have had a good run.
They’ve become accustomed to double-digit returns and low market volatility.
Now may be the time to reset to a ‘new normal’, with the side effect of single-digit returns.
The past three years are a clear indication of what lies ahead.
There will be obstacles and bumps along the way, characterised by higher market volatility and dispersion between stocks.
But is it all so doom and gloom?
What lies ahead
We are heading back into the markets of the past – what we would have deemed ‘normal’ ten years ago.
Markets go up and markets go down.
Investors have just had a really good go these past ten years fuelled by the lowest interest rates in history as a result of unconventional monetary policies implemented to avoid a deep recession.
But the ride must always come to an end.
This isn’t to say it’s doom and gloom for the forever future either.
We are simply entering the next phase.
The impact of inflation
Inflation had different ideas for us and it continues to climb higher and higher.
Our cost of goods was showing no signs of slowing down. Cost of living was spiralling out of control.
Banks now have a way out, bumping up rates in an effort to curb inflation.
The result for investors? The dulling of the markets.
Higher interest rates mean debt is now more expensive.
We are likely to see the merging or acquisition of smaller companies into the bigger and mightier ones who boast stronger balance sheets as weaker companies without a strong buffer collapse.
What will we see happen to markets?
We foresee a more balanced portfolio consisting of equities, bonds and other assets will come back on trend as we navigate rising interest rates and we reset the ‘new normal’ switch.
Expect to start seeing single-digit returns like the days of old, with greater volatility over the long term.
As always diversification is paramount and bonds will play a key role in future portfolios.
If you’d like to have a chat with one of our Financial Advisors, book an appointment today.
