Investing lessons to boost your portfolio in 2023
It would be an understatement to say that the past year has been disappointing for retail investors. Stocks skyrocketed, cryptocurrencies boomed, and markets bubbled during the pandemic-era enthusiasm that was fed by low-interest rates. Then 2022 touched down with a thump.
With the S&P down almost 20% and the Nasdaq down more than 30% as the year comes to an end, the environment has changed as a result of Russia’s war in Ukraine, persistent inflation, rising interest rates, and concerns of a recession. Even worse, Bitcoin has fallen more than 60%.
With this in mind, The Asian Mirror put four questions to financial advisers from across the country. Two questions focus on lessons learned from the past year, and two on what’s ahead. Here are some investing lessons to boost your portfolio in 2023
Will things get better the following year?
The future is not promising. Executives from banks have been predicting job losses and a recession until 2023. And there is still disagreement among analysts as to how high the Federal Reserve would raise interest rates, which are supposed to combat inflation but have also dimmed the economic outlook.
What did you get wrong?
Despite the return to normal of pandemic-related commodities inflation, I didn’t anticipate how much our labour scarcity would result in stickier wage increases and services inflation. The job market is still incredibly confused. Commodity prices were undoubtedly also under pressure as a result of Russia’s invasion of Ukraine, but domestic inflation is a much bigger problem.
What did you do perfectly?
That the Fed would focus exclusively on inflation. After deciding to stop using the word “transitory” in their messaging and having their employment mandate essentially met by the end of 2021, we anticipated that the Fed will only have one functional mission in 2022: price stability. We weren’t unduly startled by the commitment to fighting inflation, even though the pace has been faster than expected. We also anticipated that the consumer would continue to be a strong sector of the economy, and that prediction has come true. Retail sales and consumer spending have been strong despite historically high inflation and rising interest rates.
How are you telling clients to position themselves for 2023?
We advise clients to keep their plans in mind throughout the long term. The setup for long-term investors is beginning to seem promising, but we still anticipate further volatility in the near term, including the potential of retesting the October lows early in the year. The majority of valuations have been reset, and fixed-income rates are still circling near decade-high levels. More strategically, we believe defensive posture and caution in the short run make sense. As we approach an economic slowdown, we’d prefer to increase quality in both fixed-income and stocks while utilizing rallies to cut back on exposure to riskier assets.
