2023 Mid-Year Review


The halfway mark of a calendar year is an excellent time to take stock of what happened during the first six months. Learning from the past is a key habit in helping us navigate the financial challenges we will face in the future. It’s only by internalising these lessons that the mature investor can learn to say with confidence in the face of a crisis, “It’s never different this time.”

What’s Happened

The 2023 story starts in October 2022. The world’s largest stock market had declined by 25% over nine months. During this time, investors were inundated with news about stubborn inflation, rising interest rates, an ongoing war in Ukraine, and fears of a coming recession. Not surprisingly, consumer confidence was lower than it had been in four decades. For the first time since 1999, the average forecast of “experts” was for another year of negative returns.

We now know that, with no apparent warning, the market has risen by over 24% from the October lows. The official year-to-date return is 16% at the time of this writing. For those who remained disciplined, this represents years of regained independence and freedom.

What We’ve Learned

While the exact market dynamics will never repeat, we know that they rhyme, so for the benefit of our financial future, we reflect on three lessons we believe are worth memorialising.

1.     Timing the market is a fool’s errand.

Our minds are wired to extrapolate the present into the future. During a market crisis, we assume that further declines are inevitable. However, acting on this premonition by trying to time the market is futile.

What we’ve seen time and time again is a reversion to the mean in advance of clear economic evidence that the worst is over. Those who reacted in October, expecting further declines, have sacrificed years of independence that will now have to be regained.

2.     The future is always uncertain.

You could be forgiven for thinking that, having almost reached the previous market highs, the future must look brighter. You’d probably be surprised to find out that despite recent gains, the future is no more certain than it was eight months ago at the trough of the decline. Inflation is still a challenge, even in many developed markets, and we could still see further interest rate increases. The war in Ukraine is still ongoing. A recession is still expected by many. Take comfort that the biggest companies, with the best management, are actively thinking of new ways to overcome the current challenges.

3.     Proactive planning is the antidote.

While we are unsurprised about the market’s recent recovery, we do not know what the short-term future holds for global markets. Indeed, we never will.

Unsuccessful investors are continually reacting to current events. Our approach is to remain steadfastly focused on your long-term goals by proactively acting on a plan. The principles underpinning this plan are patience, discipline, and rational optimism inspired by a long history of human ingenuity. We’re confident this approach will give you the best chance of lasting financial success.

Looking Ahead

The second half of 2023 will surely bring us new and different challenges. However, we are confident that no future challenge will be too much for our structured approach. We will continue to plan for the long term and refuse to react to current events. We will continue to own diversified portfolios of superior companies that have demonstrated the ability to increase earnings over time. We will not succumb to the temptations of temporary market declines.

It is a privilege to serve you, and we look forward to guiding you through every challenge on your financial journey.