No. We continue to think investors should tightly manage risk by keeping equity allocations and bond duration in line with broad policy targets and resist the temptation to time the market.
The 2022 US edition of our annual report on the history of financial markets provides context for the range of returns investors can expect from equities, bonds, and cash; reveals the importance of various components of equity returns; examines the evidence for equity mean reversion; and reviews the relationship between initial valuations and subsequent returns for equities and bonds.
New Zealand markets had difficulty gaining ground in 2022, although they still demonstrated greater resilience than many of their global counterparts. For 2023, the weakening outlook for domestic growth and the prospect of more restrictive interest rates remain key risks to New Zealand market performance.
Risk assets broadly declined in February, reversing some of the rally from the last several months.
This publication presents manager performance for 36 asset classes and substrategies, showing the median, mean, and key percentiles of return. Relevant indexes for each asset class are also included to provide market context.
Calendar year 2022 witnessed multi-decade record inflation and central banks responded with rapidly tightening monetary policy. Rising rates saw the correlation between bonds and equities turn positive, contributing to large declines across most asset classes. Funds flows diverted away from growth and momentum strategies, and yield curves flattened with the ten-year/two-year yield curve becoming inverted in most developed markets, signaling economic uncertainty ahead.
Risk assets broadly advanced in January, continuing their fourth quarter rally after a difficult 2022.
Risk assets closed a tumultuous year on a positive note in fourth quarter.
Yes. Markets will be less vulnerable to rising rate risk next year, as the aggressive tightening that has weighed on markets for much of 2022 has moderated more recently since inflation has slowed.
We expect most liquid credits will generate higher returns in 2023 relative to 2022, given the better yields on offer. We also see private credit as offering opportunities, particularly in secondary trading.