by James Parkyn

As 2022 draws to a close, we wanted to look back at the blog posts that drew the most positive reaction from our readers during the year.

As markets gyrated, the focus in 2022 was on how to deal with a protracted downturn and prepare for the next bull market. I looked at everything from how to keep a tight rein on your emotions to avoiding poor decisions when markets are falling to the importance of not falling prey to unhelpful predictions.

You can’t catch a market rebound if you’re not invested—U.S. stocks and bonds suffered through one of their worst ever six-month periods to start the year. The Canadian markets were also down, although by a smaller margin. Naturally, these declines made many investors nervous about just how bad the losses would get. Then, the markets rebounded powerfully over the summer. A similar pattern played out in the fall. A steep decline in September was followed by rebound in October and November. These episodes show just how fast the markets can move.
4 ways to prepare for the next bear market—I wrote this piece before the U.S. stock market had fallen into bear market territory by dropping more than 20% during the spring. It contains timeless advice on how to prepare for serious market downturns and ride them out when they inevitably come.
Ask yourself this simple question before changing your portfolio—From the field of behavioural finance we know that people tend to feel the pain of losses much more intensely than the joy of gains. That’s why falling markets can provoke so much anxiety and lead investors to make wealth-destroying decisions. One way to deal with the temptation to overhaul your portfolio in the heat of the moment is to ask this simple question: Once I make this move, then what?
Will higher interest rates push the economy into recession? —Predictions come in many shapes and sizes. This year the media has been focused on how high interest rates will have to go to bring down inflation and whether these hikes will push the economy into recession. In this article, I discuss an interview with former Bank of England Governor Mervyn King who offers some sage advice about the value of predictions. (Spoiler: He’s not a big fan.)
Does diversification still make sense? —With stocks and bonds falling around the world this year, there seemed to be no safe harbour. Since the financial crisis of 2008-09, global markets have appeared to move in lockstep during times of trouble. This has led some investors to question the value of portfolio diversification. I take a closer look at this question with the help of the Credit Suisse Global Investment Yearbook, which is a guide to historical returns for all major asset classes in 35 countries, stretching back in most cases to 1900.

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We hope you are enjoying a restful and joyous holiday season and the whole team joins in wishing you a healthy and prosperous 2023.