Chairman of Vairo’s board Iļja ArefjevsPhoto: Kaspars Dobrovolskis
Although the year 2023 is not over yet, it is safe to believe that it will go down in the history of financial markets as one of the most interesting. Mainly because the predictions of even the brightest minds in the world of investment turned out to be very wrong this year in reality, Iļja Arefjevs, chairman of the board of IPAS Vairo, shares his thoughts.
Forecast errors and unexpected surprises
First of all, at the beginning of the year, hardly anyone had predicted such a rapid rise in interest rates, especially in the US (with the 10-year rate approaching 5% per year). Therefore, already in the spring, we could observe pronounced investor nervousness and even “swaying” of the US banking sector. Almost simultaneously, three commercial banks ran into difficulties – Silicon Valley Bank, Signature Bank and First Republic Bank. Continental Europe, on the other hand, was shaken by Switzerland’s second largest banks Swiss credit insults
Second, the financial market background was negative not only for bonds (due to rising interest rates), but also for stocks (due to both interest rates and rising risks). In previous years, the US stock market was “pulled” by technology companies, for which low interest rates were a springboard for growth. It was regrettable to observe how quickly this technology company (Alphabet, Amazon, Apple, Microsoft, Meta and others) stock prices slide down. However, quite unexpectedly, in the final quarter of the year, we saw a rapid “rally” of share prices. As a result, the vast MSCI World Equity the global company stock index rose by 15% in the eleven months of this year. Will you say a lot? The index of shares of technology companies showed an increase of about 40%!
Can we expect something similar in the future?
While these rates of return are truly impressive, few would have predicted them. Nor is there any guarantee that they will recur in the future. The financial market can be compared to the weather – very variable and difficult to predict. Always be prepared for unexpected changes. However, just as summers are expected to be warmer than winters in the long term, so in the financial markets stocks are generally more profitable than bonds in the long term.
2023-12-20 09:48:23
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