All serious investors should pause at least once a year to admit their mistakes. Normally, we learn more from our failures than our successes. So, though painful, this reflection should help us refine our approach and identify whether we need to change it.
This year I am struggling to get my head around what has happened, simply because things have been so weird. Global equities have risen 21 per cent in sterling to date. This is after 13 per cent growth last year (with a big wobble in the spring). This adds up to 84 per cent gains over five years and 238 per cent since the low in February 2009. Anyone would think we had enjoyed an economic boom!
At university I read the classic text by US economist Paul Samuelson, Foundations of Economic Analysis. He taught that a rise in inflation sees bond yields follow in tandem. In the US, CPI inflation rose from 1.2 per cent in October last year to 6.2 per cent this October. US 10-year conventional bond yields were 0.8 per cent a year…