By Tim Wishart

In 2008, the financial world went through a period of extreme change: the combination of the financial disaster and the extraordinary shift in central banks’ actions ensured investment life would never be the same again.

The years since the great financial crisis of 2007-2009 have brought (in no particular order): commodity booms and crashes; rolling economic and financial distresses in Europe; a gaping chasm in the fortunes between the rich and the poor; growing volatility and extremes in political views; wild swings in sentiment towards emerging market assets; a bubble in US investment markets; the lowest ever recorded interest rates and bond yields; growing distrust amongst many countries as we move towards a “multi-polar” world; the onset and the lingering concerns of the Covid-19 medical crisis; and, most recently and of greatest concern at the moment, the outbreak of war on European soil.

If there had been a current Nostradamus with us back in 2008 who had outlined what the next decade or so ahead would have offered, investors would have baulked at the prospects for financial markets and sought the safety of cash, thereby missing out on a golden period for investments.

Indeed, despite the myriad challenges that investors have faced since the 2008 financial crisis, it has been possible to make excellent returns in both nominal and real (adjusted for inflation) terms. To be clear, we feel confident we will be able to do so again in the coming years.

There might be an inclination to utter the most dangerous four words in investment history,

“it’s different this time”, given how miserable

the current outlook might appear, but the truth

is that it is never that different.

Certainly, we might well be in for a period of nerve-racking volatility in the months ahead, and it might be structurally harder to have the same smooth success that investors enjoyed in the 2010s in the “Turbulent Twenties”, but history teaches us that we adjust to an ever-changing world, and, in simple terms, asset markets rise over time.

If that view is correct and ultimately investors should just own assets and let time do the hard work, should we look through the current market travails and take a very passive approach to managing our clients’ assets?

We believe that would be a mistake. While the future over the long term will likely bring rewards to investors, the short to medium term appears

a greater challenge for us all.

If we compare the last decade to the current decade, we are likely to see a variety of different conditions that we must factor into our asset allocation decisions and our investment selections.

Whilst the fast and furious action of the last two years has rendered the last decade “ancient history”, we fondly remember the era of low inflation, low interest rates, low but positive economic growth and high asset market returns. It was an era of relative calm manufactured by central banks and encouraged by short-sighted governments, who threw fiscal discipline out

of the window and concentrated on short-term satisfaction.

Fast forward to today, and the world is a very different place. Inflation is now everywhere, and is becoming a psychological issue.

Interest rates are rising and forecast to increase rapidly through this year, at least. The calm created by ever-supportive monetary policy now appears to be over.

Economic growth is unpredictable but is likely to be at similar levels to the last decade, though with a “bumpier” profile in the coming years. Governments will surely at some point feel they need to rely less on persistent debt creation and try to balance the books.

Investors might digest these views and want

to get “off the ride”. One could easily put these ingredients together and assume it would be

a toxic cocktail and a dangerous time to be an investor. We would disagree. Yes, it seems certain that asset market returns will be harder won in the rest of this decade; this much is nearly certain given the structural over-valuation of

core asset markets, which have hitherto been supported by the central banks.

Such a broad assumption would, however, miss the less obvious point that if one is willing

to look hard and investigate lesser-known investments, there is a rich seam of investment opportunities for us all to exploit.

Tim Wishart is head of Scotland and the north

of England at Punter Southall.