Looking at the portfolio half full

With August closed, 2022 is shaping up to be one of the worst years in terms of returns for international markets. Although after an exceptional July (+9% for the S&P 500 in the month) it seemed the trend was reversing, the last 4 weeks revived sharp declines and renewed volatility in markets in general. Persistent inflation and the potentially greater aggressiveness of monetary policy in the developed world bring us closer to the year's lows.

However, for local investors, it's not all doom and gloom. First, local fixed income, due to its high indexation to the UF and greater market stability—once the pension-fund withdrawals were left behind—has posted double-digit returns, beating inflation. On the other hand, the rise in the dollar makes the peso return of foreign assets “less bad.” The exchange rate has risen almost 9%, trimming the losses of global investments despite a plebiscite result that suggested a significant drop in the dollar. Finally, the Chilean stock market stands out as one of the leading markets internationally. The IPSA index has increased its valuation by more than 29% so far in 2022.

Thus, diversification continues to prove valuable, even defying intuition in the Chilean case.

It would be ideal for global markets to reverse at least part of the year's losses heading into December. For now, all that's left is to look at the portfolio half full.

This column was originally published in the newspaper La Segunda on September 15, 2022 [LINK]