Navigating the uncertainties and finding the opportunities

Roné Swanepoel, Business Development Manager at Morningstar Investment Management SA

A few reminders as we embark on another year of investing

“Investors cannot earn high returns without occasionally bearing great loss. If the investor desires safety, then he or she is doomed to receive low returns.” – William Bernstein.

2022 was a year where most investors had to stomach great losses. Looking back at 2022, most investors are likely to say “good riddance” to the year that was, for a myriad of reasons –

• The Morningstar US Market Index ended the year down 19.4% - its biggest annual loss since 2008.
• Bonds had their worst year in modern history, as the Morningstar US Core Bond Index fell by 12.9%. Prior calendar-year losses for the index had never exceeded 2%.
• Technology stocks plummeted. The Morningstar US Communication Services Index—containing tech giants such as META Platforms (Facebook’s parent company) and Alphabet (Google’s parent company) — declined by 40.9%, marking its worst loss since the start of performance history in 1998.
• The US Federal Reserve raised its benchmark federal-funds rate at its fastest pace in history, with seven interest-rate hikes through the course of the year, bringing the effective rate into the 4.25% - 4.50% range (up from zero in January). We also saw steep interest rate hikes locally.
• By the third quarter of 2022, the US dollar rose to its highest level in two decades, resulting in the weakening of most other currencies against the dollar.
• Cryptocurrencies had a painful year. Bitcoin, the largest cryptocurrency, lost over $550 billion in market capitalisation and declined by 64.7%.
• On the local front, Eskom's woes continued, as South Africa endured a total of 208 days of loadshedding in 2022.1

Due to all this turmoil, investors were desperately seeking safety and the expression “cash is king” sadly made a comeback in 2022. As we embark on 2023, investors are still grappling with a lot of uncertainties and are left wondering how to navigate the year ahead.

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