The 12 Days of 2022
16 Dec, 2022
Ho Ho Ho, everyone! This is my last blog of the year and it’s a round-up of what happened in the NOT boring world of finance, some tips from the experts, a quick mortgage and rate update – and some things to look forward to. But let’s start with a jolly carol.
In the year of 2022, my true love gave to meeeee...
(Minus)Twelve per cent average low risk portfolio returns*
Eleven per cent inflation 🤢
Ten energy stocks a-leaping 🔥
Nine interest rate rises in a row
(202)8 till tax thresholds unfrozen 🥶
7% five year fixed mortgages
Six geese a-over-tightening monetary pol-i-cy
Five traaa-in strikes 🚂
Four Chancellors
Three (Prime) Min-is-ters
Two Whingy Royals
And a cost of living cri-sis 🍞
In other news… Fangs for nothing
It’s been a shabby year for the artists formerly known as FANGs. The New York FANG+ Index of larger US growth companies such as Meta (Facebook), Netflix and Alphabet (Google) has fallen by about 35% in 2022. Oy vey. Tech stocks have felt the pain but…
Give thanks at the altar that is the US dollar
The strength of the dollar has been a secret saviour for many investors in US or global funds. Jason Hollands, MD of Bestinvest, points out that the S&P500 lost 15% (including dividends) in 2022, but once this is converted back to £s, the loss is ‘only’ 6%.
That said, things are now seemingly going the other way so investors may want to read up on hedging over the New Year. Better than watching the EastEnders omnibus? This short clip from a recent webinar with Invesco touches on hedging, or removing the risk of currency shenanigans from investing.
Stop ignoring bonds
I have to really give myself a strict talking to over this one. Let’s be honest - bonds have been boring as 🦇sh*t for ages. IMHO. But this year they have had a makeover and look almost foxy. 10-year gilts – which are bonds, or loans investors make to the UK Government in return for interest – are now paying 3.23%, up from just 0.70% 12-months ago.
Bond prices basically go the other way to interest rates. So if interest rates are due to fall next year then the theory is that bond prices should go up. For those who like funds, Artemis Corporate bond and Jupiter Strategic bond are perennially popular. Investment commentator Mark Dampier has bought the hedged iShares US Treasury Bond ETF, which is an interesting shout.
Five gold rings 💍
Gold always comes back into discussion when the dollar gets weaker and people crave certainty. You can buy this directly – I have some gold with the Royal Mint. The tech journey is pretty 1980s BUT I’d rather they had the gold than me stashing it behind the tea bags. For most, the better alternative is to look at a fund (which will probably invest in things related to the gold market so it’s indirect) OR an exchange-traded commodity (ETC) fund. Jason Hollands rates the Invesco Physical Gold ETC.
And it’s not all bad…
It’s been a good year for commodities, Latin America, and a not-awful year for healthcare and infrastructure (not awful is about as good as it gets in 2022!). I use an Exchange Traded Fund to access commodities and hold the WisdomTree Enhanced Commodities ETF, which has had a bumpy but OK ride this year. And Peter Sleep from 7IM rates the Amundi MSCI World Healthcare ETF – in his opinion, healthcare spending tends to grow steadily regardless of the state of inflation, so it’s a defensive play.
Mortgages 🏠
A final word on interest rates which have hit a 14 year high of 3.5%, adding about £25 a month for every £100,000 on a tracker mortgage. This week I interviewed David Hollingworth, Associate Director at L&C Mortgages on what to expect next year. He thinks that fixed rate mortgages have peaked for now and observes that they have already fallen since the mini-Budget hiatus. The market forecasts interest rates will peak at 4.5% next year.
…And now... Thank you
Thank you to all our readers this year. The hour I take every Friday morning to write the blog is one of the happiest hours of my week. I love writing it. I hope you like it too. As a final request, if you do like the blog or the site, please leave us a review on TrustPilot or tell your friends about us. It all helps.
Have a wonderful, happy, healthy Christmas and I’ll see you all for more fun and games in 2023. 🎄
Holly
*For our more pedantic readers, that’s the average return of a robo adviser ‘low risk’ portfolio in the 9 months to September, to be precise! It was kinda hard finding something to do with 12!
