Since I addressed Markets Summit 2022 back on 23 February, arguing "The days of abnormal monetary policy are over", Russia's invasion of Ukraine has triggered a food and energy crisis while declining consumer sentiment and Chinese lockdowns provide headwinds to growth.
Is there such a thing as normal? Steady states are becoming increasingly rare, the belief in 'reversion to the mean' is less relevant than ever and, ultimately, investors are better placed focusing long-term change.
Over the long-term, dividend growth and dividend yield are the dominant sources of long-term return. Valuation's importance recedes over time. Sustainable dividend growth companies appear to play defence well.
A great attack scores points, but defence wins premierships. The same principal applies to investment portfolios. By making private debt the centre of a defensive strategy, investors can win in all conditions.
For many decades, the default investment portfolio was a 60/40 split – this was seen as the ideal blend of growth and defensive investments for most investors most of the time. Will it continue to deliver in a high inflation, high interest rate environment?
Although traditional barriers to participation in PE are fading, PE remains on the bench for many individual investors. With an end to easy value creation and challenging conditions ahead, don't miss out on PE outperformance in 2022.
The next decade of decarbonisation is the decade of opportunity to de-risk portfolios and identify green investments. Climate change risk factors are changing asset valuations. Key to success is the need for portfolios to account for climate change risk or risk being obsolete.
Rising interest rates will create casualties and collateral damage in asset prices, but will bring back market discipline, requiring a rethink of what "defensive" even means.
Investors shouldn't overlook the potential benefits of focusing on companies in the energy sector. It looks like what's "old" will be “new” again.