From the desk of Willie Delwiche.
Over the course of 2022, the two-year (8-quarter) return for the aggregate household portfolio dropped from one of the highest levels in over 40 years to underwater for the first time in over a decade.
Why It Matters: Sentiment soured in 2022 but investors largely stuck with their equity exposure. They choose not to meaningfully increase their exposure to bonds or cash (and commodity funds actually experienced outflows last year). Now investors are reviewing portfolios that didn’t just experience a bad year, but are actually down over the past two years. This is unfamiliar territory for a generation of investors who are not used to sustained weakness and who see US large-cap equities as the only game in town.
2022 was a bruising experience for many and 2023 is an opportunity to put aside broken paradigms and embrace forgotten realities. My expectation is that this leads to overdue discussions about proper diversification and adaptive positioning, across and within asset classes. Reach out if you are ready to talk or need help with these important conversations.
In this week’s Sentiment Report we take a closer look at how investors are feeling and what they are doing after a year that brought an unprecedented combination of volatility and weakness.
