Why cautious investors will suffer the most...
An interesting but true comment from Dan Eachus at 7IM Investment Management:
"Bonds won’t bounce back – get prepared to wait
?UK gilts have had a rough ride this year – that’s been well documented. But just how bad has it been?
To the end of October 2022, long-dated UK gilts have lost one quarter of their value. It’s been carnage!
Barring something spectacular happening in the next two months, this will be the worst year for UK bonds since at least 1899. Go back 123 years and you STILL can’t find something comparable … that’s pretty bad:
Source: Barclays Equity Gilt Study (1899-2000)/Bloomberg (2000-2022)/7IM
?We keep getting asked when it might get better, and how quickly. Is there a chance this pain might go away?
?The answer isn’t pretty.
To be back to flat in 1 year needs a 35% return. Returns on that scale have only happened three times in the 123 year history below; in 1932, 1977 and 1982. It’s not likely. We shouldn’t be counting on it.
One of the best indicators for bond returns over the long term is the current yield. What you buy at today, is likely what you’ll end up with at the end. 15-year UK Gilts yield 4% today. At that rate of return, you’d make back this year’s losses in 8 years.
Cautious investors will need to be emotionally prepared to make their money back slowly. It’s a difficult message to communicate, but it’s the truth."
Let us know if we can help.
Thornton Holmes Dip PFS Certs CII MP & ER
Tel: 03300 244244
www.orchidfinancialservices.com