The above chart illustrates how various asset classes have performed over the most recent period by showing the performance of some of our benchmark funds in each of the main asset classes.
It has been a difficult 2022 for Bond markets as rapidly increasing inflationary expectations and rising interest rates have caused prices to fall heavily. Inflation linked Bonds have provided some protection against the impact of rising inflation. Bond markets as a whole are now offering more attractive yields and return expectations from this point should become more appealing.
Irish and UK Property has been a big driver of outperformance in portfolios year to date as thus far they have managed to weather the inflationary and geopolitical issues that have impacted other asset classes. However, a higher interest environment may ultimately limit further upside potential in the nearer term, albeit longer term we would be optimistic for growth prospects.
Similarly, to bonds higher interest rates and geopolitical tensions have weighted on equities year to date (in local currency). However, the weaker euro versus the dollar has sheltered most of the falls in equities and for the first time in many years value has outperformed growth as a style. It has been a challenging period for smaller company and emerging market equities, but they look attractively valued versus the broader market and we continue to advocate an exposure to these parts of the equity market.
Generally, the falls in equities (in local currency) have made valuations more attractive, however volatility is likely to persist in the short-term as markets await to see the impact of higher interest rates on economic activity.
It has been hard to find shelter from all the challenges that have impacted investment markets and year to date multi asset funds have had a difficult 2022. Those funds that have held property, inflation linked bonds and have an exposure to commodity assets have fared relatively better.