The writer is co-head of investment and group chief investment officer at SchrodersThe market misery of 2022 was almost universal, inflicted by a seismic regime shift towards both higher inflation and higher interest rates.
Investors faced by tumbling equities couldn’t find the sanctuary in bonds they have grown accustomed to. As the S&P 500 index fell 19 per cent over the year in dollar terms, 10-year Treasuries dropped in virtual lockstep, losing 19 per cent.
This made things very difficult for the popular 60/40 portfolio of bond and equities which usually aims to deliver “inflation-plus” levels of returns. A portfolio of 60 per cent US equities and 40 per cent long-term US government bonds would have underperformed inflation by 28 per cent in 2022.