YOUR PORTFOLIO
Chasing your tail
One of the dominant narratives that has emerged in 2022 is that of the end of the growth era . After the end of the financial crisis , buying a company for the returns it may conceivably make in the future wasn ’ t just a respected strategy , it was the only one that appeared to work . Fund managers who clung on to old-fashioned beliefs that you should base your investment decisions on buying companies that looked cheap relative to the amount of money they were making today found themselves glued to the bottom of performance tables – if they managed to keep their job . This year has seen this state of affairs turned on its head , which shouldn ’ t have come as too much of a surprise , according to Richard Bernstein , chief investment officer at Richard Bernstein Advisors . He says it is unrealistic to expect one segment of the equity market to be appropriate for every economic scenario . However , he notes that despite historical precedent , investors are typically hesitant to reposition portfolios when the economy changes . “ They tend to cling to the old leadership , hoping those stocks ’ underperformance is only temporary , and the economy and the markets will soon revert ,” he says . “ The global economy is going through major structural changes that seem likely to alter the secular trend in inflation and interest rates . It makes sense that new leadership is better suited for new secular trends that are emerging .” It is only natural for investors to fear the unknown . Yet Bernstein says those who have held on to growth stocks despite mounting signs the market environment is turning against them have so far paid with average losses of about 25 %. While professional investors
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