Mid 2022 Investment Outlook: What’s The Way Forward?
Just as the Covid-rattled world economy is setting out towards recovery and growth, Russia-Ukraine crisis is a dampener on us. This article is a general opinion on Mid 2022 investment outlook to better your investing journey!
Inflation has become a major concern now. Most of the things in our consumption list are becoming costlier.
Globally, respective Central Banks and Governments are playing their respective roles to tackle these times.
As we are sharing our Mid 2022 investment outlook and the way forward, we need to take into cognizance a lot of domestic as well as global factors.
Financial markets are reflecting high volatility. During these times, do we need to do anything extraordinary?
Amidst Russia-Ukraine crisis related headlines of rising oil and gas prices, food inflation, industrial setbacks, you need not get carried away.
If you are periodically reviewing and following your Financial Plan, you need not worry about the short/medium term turbulence.
Even airplanes fall in air pockets.
If you have been investing since 2007-08, recall the 2008 financial crisis. What comes to your mind? Was that phase easy for investing? In January, 2008, Sensex opened at 21,325 points. Sensex closed at 9,647 points in December, 2008 (more than 50% fall). Undergoing fluctuations, Sensex closed at 21,170 in December, 2013.
To get 2022 investment outlook, look at Sensex movement from 2008 to 2013, Source: https://finance.yahoo.com/
Basically, it took about 5 years to break-even.
Our problems were mainly due to the sell-off by foreign institutional investors in the domestic equity markets leading to a sharp reduction in net capital inflows and the sharp slowdown in global economic activity and external demand.
On the other hand, it is important to critically analyse the 10 year Bond yield curve during 2008 to 2013 period.
10 Year Bond Yield from 2008 to 2013, Source: https://tradingeconomics.com/
RBI initiated a series of increases in the cash reserve ratio and issuances under the Market Stabilisation Scheme to address the liquidity issue.
The reason to share these is that Government and the Central Bank played their respective roles. There’s not much we can do! But, as an investor we have to remain rational.
Now, if we talk about the market crash due to Covid- 19 pandemic, the recovery was different. Sensex fell from 41,000 level to as low as 25,638 in March, 2020 (more than 30% fall). However, by December, 2020, much to everyone’s surprise, markets surpassed its previous highs.
To get 2022 investment outlook, look at Sensex movement in 2020, Source: https://finance.yahoo.com/
It took less than 1 year to break-even.
The 10 year Bond yield curve went through volatility as well.
10 Year Bond Yield in 2020: India, Source: https://tradingeconomics.com/
Monetary policy and liquidity operations during 2020-21 were geared towards mitigating the impact of COVID-19 pandemic. The monetary policy committee (MPC) cut the policy repo rate by 115 basis points (bps) during March-May 2020. The goal was to ensure that no part of the financial system faced liquidity concerns or credit constraints.
Based on these indicators, we need to define our goal-based investment strategies.
Is India the only country who’s witnessing turbulence? Definitely not!
During the 2008 financial crisis, this is how the world equity markets reacted:
MSCI from 2008 to 2013, Source: https://www.msci.com/
Again, the Covid-19 triggered a significant draw-down across the global indices.
MSCI in 2020, Source: https://www.msci.com/
Impacts and recoveries from these 2 events were different. Post 2008 financial crisis, markets took around 5 years to recover. Again, we witnessed rapid recovery after pandemic-triggered market crash. Thus, history may or may not repeat itself.
Why do we keep saying that your time in the market for your time-bound financial goals matter? Because, trying to time the market is a futile activity. What we can do is set up suitable investment strategies for you as “buy and forget” strategy doesn’t always work.
You do not know how long an “air pocket” will go on. But, your financial goals are there for you to achieve. What matters is how you act/respond in different market cycles. Therefore, as Mutual Funds Advisor in Kolkata, we are following necessary asset allocation strategies for respective clients.
Trying to do too much can be disappointing. As SEBI Registered Investment Adviser in Kolkata, we believe that all you need is conviction, discipline and patience.
If we were not confident about India’s growth in the long run, we wouldn’t have been investing our savings in the first place. If we didn’t recognize the value in investing globally, we wouldn’t have taken off-shore exposure.
You need to trust the process. We want you to achieve your life-goals.
When we talk about our 2022 investment outlook, impact of Russia-Ukraine crisis is unfolding. Thus, we are maintaining suitable asset allocation strategy in your portfolio to address ongoing market fluctuations.
To get 2022 investment outlook, look at Sensex movement in 2022, Source: https://finance.yahoo.com/
Different geographical regions are being impacted in different ways. The repercussions and its varying degrees are expected to influence global indices.
Our mid 2022 Investment Outlook is based on the market volatility visible via MSCI in 2022, from January to May, Source: https://www.msci.com/
When equity markets are reflecting volatility, debt markets are no exception either.
The 10 Year Bond Yield in 2022, from January to May is a guide for our Mid 2022 Investment Outlook, Source: https://tradingeconomics.com/
We are combating inflation. Retail inflation has been trending well above RBI’s upper tolerance level of 6%. We all are feeling the heat. Retired people, surviving on passive income are in a challenging scenario. Can we avoid this? Certainly not! This turbulence is temporary. But, you need to have a plan to tide over.
A sharp rise in Treasury rates this year has been a massive drag on fixed income.
Investors aren’t used to seeing dramatic losses in their bond portfolios, particularly when equity markets are also declining sharply.
If you want to create wealth in the long term, you need to be a patient investor. We all are investing our hard earned monies to generate returns and achieve our financial goals. As Certified Financial Planner in Kolkata, we understand that there’s no second thought about this.
But, if you are expecting handsome return every calendar year, it may be unrealistic. Ultimately, you don’t enjoy the journey and end up with distress.
As your Financial Advisor in Kolkata, we are considering the downside risk too!
We keep saying that both “greed” and “fear” are detrimental in investing. What exactly do we mean?
When an investor doesn’t have a purpose (definite goal), he/she tends to chase returns. Market noises direct them to take investment decisions. This mentality makes him/her fall prey to emotions (greed and/or fear) very easily.
When markets were booming in September, 2021, various sources published their reports. Some said markets will keep going up. Some said that pictures look gloomy. Can we act based on market noises? Even sources which highlighted short-term market volatility, could they factor in the Russia-Ukraine crisis? Obviously, no!
If you are getting offended when you are seeing low/negative return in your portfolio in the short/medium term, you need to acknowledge the economic conditions (domestic as well as global).
This is what markets do – they have ups and downs. Considering risk-reward scenarios, we have to live with these market fluctuations. Since we can’t predict the future, we can’t really say when will markets fall and/or bounce back. Therefore, as your Fee Only Financial Planner in Kolkata, we always discuss about your financial goals before making you invest your money.
Market fluctuations are normal
We agree that market falls/crashes can be frightening in the short term. Your investing experience with us matter. We strongly believe that suitable investment strategies have the potential to provide rewards for taking these risks in the long run.
Carl Richards, a thought-leader from our financial planning industry recently shared an interesting belief, “You would never plant an oak tree only to dig it up each quarter and see how the roots are doing. If it compounds…let it compound.”
Let’s focus on our time-bound financial goals, trust the process and stay the course.
