A trip through time

Let's do an exercise. Let's go back twelve months in time. Sector bets for the U.S. stock market? Technology and real estate. Any sector to leave out? Energy. The arguments are quite direct: in a post-pandemic world, Netflix, Zoom, Spotify, etc. are surely irreplaceable in our routines. On the other hand, home prices reached all-time highs in North America and the trend was far from reversing. Moreover, amid decarbonization commitments, electrification of the vehicle fleet and the rise of alternative energy, oil started with a clear handicap.

But the market had a renewed lesson in humility in store for us. The energy sector returned +58.4% while technology and real estate each fell more than 28% (both more than the market average, which corrected 18%).

What happened? We had inflation and rate hikes that hit both sectors after years of boom. In addition, the slower energy transition gave fossil fuels a second wind.

For 2023: spend less energy on what we can't control (future returns) and more on what we can (structuring properly diversified portfolios).

This column was originally published in El Mercurio Inversiones [LINK] on 10–01–2023