Capital Preservation Portfolio: Q4 Update

Published: 4th February 2022 (2 Min Read)

In our last Quarterly Factsheet at the end of September, we listed 10 major global concerns that faced investors as we emerged from Covid. The arrival of the Omicron variant was unheard of at that time although Covid, in its Delta form, was the first on the list. The speed with which Omicron ripped through first the developed world from late November, and now the developing world, has been amazing and frankly rather humbling of attempts to try and forecast what might lie ahead.

The Chinese regulatory crackdown, global energy shortages and long-term stagflation were considered as the most tangible concerns. Of these, Chinese regulations have eased as the country reverts to monetary and fiscal easing, in opposition to the West. Shortages, not only of energy but of other hard commodities, and potentially most of all labour, have dominated over the last quarter and into 2022, expressed through significantly higher than expected year on year rises in inflation. December’s US inflation data not only topped 7% but also was the seventh consecutive month that the change in US prices exceeded 5%. The data has rattled the Fed into talking about several interest rate rises in 2022, if inflation does not stabilise and fall back. This has been taken  badly by the market which has fallen sharply since early January 2022.

What implications does this have for the Capital Preservation portfolios? They are down slightly so far this month. Bond investments, though short duration, have detracted, as well as collectives with meaningful holdings in equities, mainly RIT Capital and Trojan. Real assets like infrastructure, gold and property, and inflation-linked gilts have largely held up. The portfolio composition is unchanged over January 2022.

To find out more about our Capital Preservation Portfolio Service, please click here.

Risk warning: You should remember that the value of investments, whether pooled or direct equities, and the income derived therefrom may fall as well as rise and you may not get back the amount that you invest. In the event that you require a level of income higher than that generated by your portfolio, you should be aware this will dilute the capital value of your portfolio. Past performance is not a guide to the future. If you are in any doubt of the suitability of an investment for your particular circumstances, you should contact an investment manager for tailored advice.

Article written by
John MacMahon