 There are few places to hide for investors when interest rates and inflation are rising. Government bonds, which are usually a good diversifier during a market downturn, have collapsed in almost equal measure to equities this year leading many analysts to refer to the current environment as the “everywhere risk”.
During the business cycle of 2010 – 2020, the average annual market return on the S&P index was about 14%. With inflation at 2%, investor’s real return was 12%. Today, however, with inflation at over 8% and share values correcting across all indices, investor returns are in free fall. The S&P and Nasdaq are down over 20% compared to this time a year ago.
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