Our Observations

• Eurozone inflation was running at 2.2% in July 2021 and is now running at 8.1% at the end of May this year.

• This is a 40 year high resulting in Central Banks around the world flagging that interest rates will have to go up and this has naturally spooked the markets.

• This comes on top of supply-side energy crisis on the foot of the Russian invasion of Ukraine and the pent up demand from the wall of cash saved up during the pandemic have led to the perfect storm for capital markets.

• The worst hit investments are Tech Stocks with even a broad basket, as measured by the Nasdaq, down 30% YTD.

• A slight reprieve for Irish investors since the US$ is up over 8% against the Euro. Investing globally is generally always the right answer.

• Cash has been the worst investment over the last 5 years and that is consistent with history where you will barely keep pace with inflation over time

• Low risk ‘defensive’ Fixed Interest or Bonds have performed a valuable function this year dropping less than the stock market consistent with their role in a portfolio

• However, the last 6 months have been the worst in recorded history for the bond market. We have data going back to 1926 and there isn’t a 6-month period in modern history which is worse for investors. Year to date the 5-year US Treasury note, generally seen as one of the safest investments on the planet is down 7.60%.

• Wherever you look around the world, without exception, investors in bonds are down this year with US Longer Term bonds down over 23% Year to date.

• Despite this, over 5 years bonds have fared better than cash as a defensive asset in a pension portfolio.

• At Everlake, we have been recommending State Savings Certificates for personal accounts and this strategy has proved to have been extremely beneficial for our clients.

• Looked at over just the last 2 years, the Stock market has been a great place for our clients and over 5 years returns have been exceptionally strong.

• The message is: Stay the course, this is unusual but nothing to worry about