All-weather investing

THE world has changed. We are living through a pivotal time in history, marked by geopolitical realignment, high inflation, volatile financial markets and the end of a 40-year period of declining interest rates. In June, Singapore’s core inflation hit 4.4 per cent, its highest level since the global financial crisis in 2008.

The title of this new era could be ‘Brave New World’ or ‘Back to the Future’. But I think ‘Revenge of the Boomers’ is most appropriate, because a lot of these events rhyme with the past, particularly the early 1960s. That is when we saw interest rates bottom out after decades of decline, as well as the rise of the Cold War era, which is unfortunately rearing its head again in some respects.

Despite these challenges, I remain optimistic about the investing environment for several reasons. First, there are still signs of growth as the global economy recovers from the pandemic. Second, I believe corporate earnings will be the driving force of equity markets going forward as opposed to multiple expansion, and that signifies a welcome return to fundamentals. Multiples needed to contract, and that is what we have seen over the past few months.