December 2022

What can we learn from the year 2022? It was certainly a bad year for the financial markets, as the two major asset classes, equities and bonds, both fell, which is very disappointing for advocates of a balanced allocation between so-called risky assets (equities) and “protective” fixed income investments (bonds).

It does, however, support our approach of a portfolio built on long-term stock selection. As soon as Russian tanks entered Ukraine on 24th February, the backdrop became chaotic on many fronts: inflation returned with a vengeance, accompanied by a marked reversal of central banks, an energy crisis and recessionary drifts. Ahead of these events, the successive episodes of the global pandemic, which have disrupted supply chains designed to operate at cruising speed and not in a stop-and-go mode, ought probably to be blamed. In 2022, the geopolitical catalyst confronted us, with a boomerang effect, with a sad waltz between repeated rate hikes by central banks on both sides of the Atlantic, fears of stagflation and anxieties about energy shortages. The markets have ratified these events: 10-year rates in the United States have jumped from 1.5% to almost 4%, a trajectory that penalises investment in bonds and, for the equity markets, a world index that has fallen by almost 20%. With a fall of the same order of magnitude (-20%), the American S&P 500 index is posting its biggest decline since 2008; the Nasdaq is paying for its past excesses with a fall of 33%. Only the energy sector (the sector index is up +40%) has benefited from the rise in prices and scarcity of energy products. It is also estimated that the dollar rose by about 8% against the basket of major currencies. Firstly, the “free lunch”of negative rates and excess capital is now a thing of the past, which will encourage the wise investor to stay away from companies with too much debt. Secondly, we believe that a return to normality is possible in terms of inflation (the peak may have been reached), the energy shock and world trade. This reinforces our strategy of favouring portfolios built on companies selected according to our prudential criteria but which can benefit from an upturn in the cycle.

What about the Clartan Associés funds? They held up well in 2022 with a contained decline of 5.1% for Clartan Patrimoine C, 6.2% for Clartan Évolution C and Clartan Valeurs C, and 10.1% for Clartan Europe C. The focus on the energy sector (Shell, Total) and the absence of overpriced US technology stocks contributed to this result. With a decline of 19.8%, Clartan Ethos is paying the price of small caps in a down market, but is gaining ground on its benchmark (-22.5%).