Insights
2022 Year-end Review
2022 was a year of false dawns for the global economy, marked by the constant recovery from one crisis being surpassed by the dark storm clouds of another one appearing on the horizon. The much-awaited post-Covid economic revival, supposedly a time when families reunited, society healed and businesses rebuilt, took on a much bleaker tone.
2022 was a year of false dawns for the global economy, marked by the constant recovery from one crisis being surpassed by the dark storm clouds of another one appearing on the horizon. The much-awaited post-Covid economic revival, supposedly a time when families reunited, society healed and businesses rebuilt, took on a much bleaker tone.
As the sun rose on the 1 January 2022, consumers around the world began the year cautiously optimistic, eagerly anticipating a world where Covid did not dominate their lives. Economies were ripe for reopening, international travel was ramping up and consumers started spending again on premium experiences from fine dining to hotels and superyachts.
Then on 24 February, Russia invaded Ukraine and all that hope evaporated.
The effect on the global recovery was undeniable, heavily concentrated within Europe where the invasion of a neighbouring territory was a reality never conceived in modern day history. Consumer spending on high-end products and services immediately took a hit given the sheer size of Russian-led demand in the luxury sector. The impact was visible everywhere, from the disappearance of Russian boats on the Mediterranean to the absence of prolific high spenders in hotels and restaurants across London, Paris and Milan.
As the year progressed, consumer sentiment began to revive, albeit hesitantly, and as the summer approached, travel was back even as war continued to rage in Eastern Europe. Capital cities were alive again with international tourists eager to spend after three years of stop-start restrictions. Restaurants, art galleries and theatres were packed and it felt like economic momentum was building. But that optimism faded quickly following a harsh intervention by Jerome Powell, the Chairman of the US Federal Reserve, with a speech from Jackson Hole where he stated that his commitment to price stability was “unconditional”. Those words ushered in an unprecedented phase of rate hikes culminating in the Federal.
Open Market Committee voting on four consecutive sessions to increase interest rates by 75 basis points, providing a shock to the financial system that is still being felt to this day. To put this into perspective, the FOMC raised rates from 0.25% in March 2022 to 4.50% in December 2022. This is equivalent to 17 25bps rate hikes in nine months, a monetary tightening not witnessed off such a low base since the FOMC was established in 1933.
The shocks didn’t end there. The UK government sparked a sterling meltdown with the ill-fated “mini-budget” and energy prices soared throughout the winter. During all of this, whilst consumer spending fluctuated, it remained resilient at the high end and was boosted towards the end of 2022 with China’s unwinding of its zero-Covid policy.
Coming through such a tumultuous year has reaffirmed our belief that fundamentally good assets and investment strategies, when managed correctly, are capable of weathering almost any storm. By making mindful investment decisions and finding creative and carefully calculated ways to grow value through best-in-class partnerships – and by taking small steps on a daily basis towards pre-defined goals – operational improvements and the transformation of assets can be concluded to deliver outstanding returns.
2022 presented challenges few of us could have foreseen, but the performance of our portfolio was a testament to the fundamental quality and strength of the investments and the ability of our outstanding team to deliver on their objectives.
