Morgan Housel, author of the best-seller “The Psychology of Money” (a highly recommended read) described volatility as “The price of admission: the prize inside is superior long-term returns. You have to pay the price to get the returns”. In other words, investing is inherently volatile - which is precisely why you earn the prize of superior returns.

Across all asset classes, there are many ways to manage volatility - some are effective, others not.  Some investors simply do nothing - accepting the price to earn the prize.  

Attempting to micro-manage uncertainty is, by definition, an unpredictable task. Far better to know it’s ever-present: investors should use the current period to ensure their portfolios are positioned for permanent, smarter investing – whilst remaining aware of prevailing issues.    

What are we currently dealing with right now?
The last few months have introduced a number of shifts within the global macro-economic landscape. We don’t need official data to explain the speed with which inflation data has accelerated – we have all witnessed that first hand. In turn, that has strengthened the resolve of central bankers to push ahead (belatedly) with rate hikes and the withdrawal of monetary stimulus – accompanied by an open acknowledgement of their response risking recession.

The net result: volatility across financial markets and new uncertainty in leveraged asset classes like property, which tends to follow (with a lag) other asset classes, especially when rates are rising.    

Historically, during times of stress, government bonds and gold would be the obvious safe havens.  We saw this during the global financial crisis in 2008 and the Coronavirus breakout in 2020. This time, a perfect storm of rising rates and high inflation have rendered bonds as somewhat of a basket case. At the same time, liquidity withdrawal has taken the shine off gold. Commodities have remained (until now) the only asset class posting strong returns.