Is the worst over?

2022 has been a complex year for investment portfolios. In mid-June, the S&P 500—which groups the most important U.S. companies—was posting declines of more than 23%, while the Nasdaq showed a 32% correction. These figures place this year among the 3 with the steepest declines since the 2008 crisis. However, the current outlook is not so negative. Today the U.S. market is “only” 10.8% below last year's closing level and the technology sector moderates its losses to just over 18%.

Is the worst over? Unfortunately, it's not possible to know with certainty. Today inflation would appear to have peaked; however, we've learned that there is more inertia than the market initially projected. The Fed continues with monetary normalization, focused on not damaging economic activity, but it is a thin line between controlling price expectations and causing a further brake on growth and inducing additional volatility in the markets. In addition, we know that the market anticipates economic events, so not even a good forecast of the macro variables will give us an answer about the future of investments.

The good news is that you don't need to predict the future to have a successful investment plan. A diversified portfolio that optimizes the variables that are within the investor's control (costs, taxation, asset allocation, etc.) is the best strategy for performing adequately across the different states of nature.

This column was originally published in the newspaper La Segunda on August 18, 2022 [LINK]