Investors have learnt some hard lessons this year, after the 13-year-long bull market collapsed into confusion and volatility.
Those who piled into high-risk sectors such as US Big Tech, cryptocurrencies and meme stocks would have learnt the oldest lesson of all, which is that share prices can go down as well as up (and the faster they rise, the harder they fall).
Here are five more lessons that many investors have learnt the hard way — and how to apply them to your portfolio.
Lesson 1: the US Federal Reserve will not always bail out markets
For the past couple of decades, every time the stock market has looked in danger of a serious correction, the US Federal Reserve has raced to the rescue with yet another dollop of monetary easing.
This was originally known as the “Greenspan Put”, after former Fed chairman Alan Greenspan, which gave investors the idea that the central bank would always backstop asset prices.
Central bankers duly raced to the rescue during the financial crisis, slashing interest rates to almost zero in March 2009, and again during the Covid pandemic, flooding the market with stimulus in March 2020.
Now the backstop has gone.
Lavishing investors with fiscal and monetary stimulus worked when inflation was low, but will only fuel today’s inflationary bonfire.
So instead of bailing markets out, Fed chairman Jerome Powell has another priority, according to Joshua Mahony, senior market analyst at online trading platform IG.
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Watch: Federal Reserve's Jerome Powell warns of 'pain' in reducing inflation
“Mr Powell is hammering home the point that monetary policy will now address inflation rather than employment or growth concerns.”
He made it clear at last month’s Jackson Hole Economic Symposium that markets must brace themselves for more interest rate hikes, Mr Mahony says. “We remain a long way from the position where rates can be brought under control once again.”
The Fed will also step up the unwinding of its $9 trillion balance sheet, Vijay Valecha, chief investment officer at Century Financial, says. “With higher interest rates putting pressure on equity valuations while an earnings downgrade cycle is under way, more market turmoil may lie ahead.”
The summer stock market rally is gone and forgotten. “Instead of saving the economy, the Fed might trigger a recession,” Mr Valecha adds.
This lesson is going to be a harsh one.
Lesson 2: you do not play games with inflation
It is now 40 years since inflation was at today’s levels and investors are seeing first-hand the damage it inflicts.
Inflation wipes out the real value of savings and squeezes incomes as everyday living costs, such as food and fuel, soar out of control.
The Fed is willing to engineer a recession and stock market crash to defeat it, but its powers are limited, Russ Mould, AJ Bell investment director, says.
“The Fed has spent more than a decade trying to fuel inflation with the blunt instruments of interest rates and quantitative easing [QE] and is now using the same tools to choke it off.”
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Jackson Hole Economic Symposium — in pictures
In 1974, inflation drove the Fed funds rate to 13 per cent. It hit 19 per cent in 1980, after the fall of the Shah of Iran in 1979 triggered a second oil-price shock.
Those interest rates are unthinkable today, with the Fed funds rate in a target range of 2.25 per cent to 2.5 per cent, but the historical echoes are making investors jittery, Mr Mould says.
Bear market falls of more than 20 per cent in the S&P 500, Russell 2000 and Nasdaq Composite may only be the start. “Even those pullbacks only take the indices back to where they were in spring 2021.”
The Fed is set to keep hammering away at inflation, regardless of the pain it inflicts, Mr Mould says. It has no choice.
Lesson 3: Germany doesn't always get it right
Germany is admired for its innovative, export-led economy, but this year even Europe's economic powerhouse has come unstuck.
The country faces political and economic disaster after getting hooked on Russian natural gas, leaving it at the mercy of President Vladimir Putin. It is now in a race against time to secure supplies of liquefied natural gas before winter arrives, after Mr Putin cut all deliveries through Nord Stream 1.
Germany now faces some of the highest gas prices in the world, Mr Mahony says. “Worryingly, consumers appear to be cutting back on spending with a view to braving a difficult winter, which is expected to drive the country into a deep recession.”
Germany's MSCI Index is down 29.6 per cent in the year to July 29, almost three times the fall of 9.61 per cent on the MSCI World Index.
Markets expect Germany’s struggles to continue, says Fawad Razaqzada, market analyst at City Index and Forex.com. “Reduced Russian energy shipments through the Nord Stream 1 pipeline have increased the risk of rationing in the coming months.”
At least Germany is waking up to its mistakes. The Government set a target of achieving gas storage of 85 per cent by October but now says it could hit that total early this month. "If it succeeds, rationing might be averted after all,” Mr Razaqzada says.
Germany has made mistakes before, but it has always bounced back. That’s another lesson history has taught us.
Lesson 4: bonds and shares can fall at the same time
Shares and bonds are supposed to complement each other within a portfolio, because when shares rise, bonds fall, and vice versa.
They are known as “non-correlating assets” and combining them in the classic 60/40 equity/bond portfolio is said to offer investors the best of both worlds.
Until this year, that is, when both asset classes fell at the same time.
It is a misconception that bond and share prices are uncorrelated, Symon Stickney, chief executive of digital asset manager Collidr, says.
“This led investors to believe that if shares fell, then the bond element of their portfolio would offer a partial hedge against that fall.”
As they fall in tandem, investors have no place to hide, he adds.
Inflation is bad for shares but spells “disaster” for bonds, as their fixed rate of income suddenly looks a lot less attractive, David Henry, investment manager at Quilter Cheviot, says. “Particularly when the starting income is basically non-existent, as was the case this time last year.”
Fund managers are “decrying the death of the classic 60/40 equity/bond portfolio” but Mr Henry cautions: “If we look at the historical numbers, maybe the grim reaper should hold on to his horses.”
Since 1986, there were just nine quarters when both bonds and stocks fell in tandem, but they bounced back strongly every time.
Which reminds us of another long-standing lesson, investing is cyclical. “Don’t get too excited on the way up, or too despondent on the way down,” Mr Henry adds.
Lesson 5: Bitcoin is not digital gold
Cryptocurrency enthusiasts have made a lot of big claims, but one of the most outlandish is that Bitcoin is now “digital gold”.
This year has put paid to that, with the price falling by more than two thirds to below $20,000.
Rather than a store of value, Bitcoin has been a destroyer. Instead of mimicking gold, it has been following moves in the US stock market, Mr Valecha says. “Bitcoin’s summer recovery of around 30 per cent was broadly in line with gains on US tech stocks.”
Bitcoin may recover, but only if stock markets do.
So what of real gold? It's also supposed to be a safe haven in a crisis, yet the price has fallen 8 per cent this year.
Gold is priced in dollars and it has been hit hard by greenback strength, which makes it more expensive to buyers in other currencies, suppressing demand.
Even if markets fall further, gold may not benefit, Mr Valecha says. “The US dollar may continue to gain, as US interest rates rise.”
Which brings us to our final lesson. The ultimate safe haven asset is the world’s reserve currency, the US dollar.
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Watch: What is Bitcoin and how did it start?
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At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
The Light of the Moon
Director: Jessica M Thompson
Starring: Stephanie Beatriz, Michael Stahl-David
Three stars
Teaching your child to save
Pre-school (three - five years)
You can’t yet talk about investing or borrowing, but introduce a “classic” money bank and start putting gifts and allowances away. When the child wants a specific toy, have them save for it and help them track their progress.
Early childhood (six - eight years)
Replace the money bank with three jars labelled ‘saving’, ‘spending’ and ‘sharing’. Have the child divide their allowance into the three jars each week and explain their choices in splitting their pocket money. A guide could be 25 per cent saving, 50 per cent spending, 25 per cent for charity and gift-giving.
Middle childhood (nine - 11 years)
Open a bank savings account and help your child establish a budget and set a savings goal. Introduce the notion of ‘paying yourself first’ by putting away savings as soon as your allowance is paid.
Young teens (12 - 14 years)
Change your child’s allowance from weekly to monthly and help them pinpoint long-range goals such as a trip, so they can start longer-term saving and find new ways to increase their saving.
Teenage (15 - 18 years)
Discuss mutual expectations about university costs and identify what they can help fund and set goals. Don’t pay for everything, so they can experience the pride of contributing.
Young adulthood (19 - 22 years)
Discuss post-graduation plans and future life goals, quantify expenses such as first apartment, work wardrobe, holidays and help them continue to save towards these goals.
* JP Morgan Private Bank
Specs
Engine: Electric motor generating 54.2kWh (Cooper SE and Aceman SE), 64.6kW (Countryman All4 SE)
Power: 218hp (Cooper and Aceman), 313hp (Countryman)
Torque: 330Nm (Cooper and Aceman), 494Nm (Countryman)
On sale: Now
Price: From Dh158,000 (Cooper), Dh168,000 (Aceman), Dh190,000 (Countryman)
The biog
Favourite colour: Brown
Favourite Movie: Resident Evil
Hobbies: Painting, Cooking, Imitating Voices
Favourite food: Pizza
Trivia: Was the voice of three characters in the Emirati animation, Shaabiyat Al Cartoon
Know before you go
- Jebel Akhdar is a two-hour drive from Muscat airport or a six-hour drive from Dubai. It’s impossible to visit by car unless you have a 4x4. Phone ahead to the hotel to arrange a transfer.
- If you’re driving, make sure your insurance covers Oman.
- By air: Budget airlines Air Arabia, Flydubai and SalamAir offer direct routes to Muscat from the UAE.
- Tourists from the Emirates (UAE nationals not included) must apply for an Omani visa online before arrival at evisa.rop.gov.om. The process typically takes several days.
- Flash floods are probable due to the terrain and a lack of drainage. Always check the weather before venturing into any canyons or other remote areas and identify a plan of escape that includes high ground, shelter and parking where your car won’t be overtaken by sudden downpours.
The specs
Engine: 4.0-litre flat-six
Torque: 450Nm at 6,100rpm
Transmission: 7-speed PDK auto or 6-speed manual
Fuel economy, combined: 13.8L/100km
On sale: Available to order now
Tree of Hell
Starring: Raed Zeno, Hadi Awada, Dr Mohammad Abdalla
Director: Raed Zeno
Rating: 4/5
Race card
4pm Al Bastakiya Listed US$300,000 (Dirt) 1,900m
4.35pm Mahab Al Shimaal Group 3 $350,000 (D) 1,200m
5.10pm Nad Al Sheba Turf Group 3 $350,000 (Turf) 1,200m
5.45pm Burj Nahaar Group 3 $350,000 (D) 1,600m
6.20pm Jebel Hatta Group 1 $400,000 (T) 1,800m
6.55pm Al Maktoum Challenge Round-3 Group 1 $600,000 (D) 2,000m
7.30pm Dubai City Of Gold Group 2 $350,000 (T) 2,410m
The National selections:
4pm Zabardast
4.35pm Ibn Malik
5.10pm Space Blues
5.45pm Kimbear
6.20pm Barney Roy
6.55pm Matterhorn
7.30pm Defoe
Super Rugby play-offs
Quarter-finals
- Hurricanes 35, ACT 16
- Crusaders 17, Highlanders 0
- Lions 23, Sharks 21
- Chiefs 17, Stormers 11
Semi-finals
Saturday, July 29
- Crusaders v Chiefs, 12.35pm (UAE)
- Lions v Hurricanes, 4.30pm
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
Recent winners
2002 Giselle Khoury (Colombia)
2004 Nathalie Nasralla (France)
2005 Catherine Abboud (Oceania)
2007 Grace Bijjani (Mexico)
2008 Carina El-Keddissi (Brazil)
2009 Sara Mansour (Brazil)
2010 Daniella Rahme (Australia)
2011 Maria Farah (Canada)
2012 Cynthia Moukarzel (Kuwait)
2013 Layla Yarak (Australia)
2014 Lia Saad (UAE)
2015 Cynthia Farah (Australia)
2016 Yosmely Massaad (Venezuela)
2017 Dima Safi (Ivory Coast)
2018 Rachel Younan (Australia)
THE BIO
Ms Davison came to Dubai from Kerala after her marriage in 1996 when she was 21-years-old
Since 2001, Ms Davison has worked at many affordable schools such as Our Own English High School in Sharjah, and The Apple International School and Amled School in Dubai
Favourite Book: The Alchemist
Favourite quote: Failing to prepare is preparing to fail
Favourite place to Travel to: Vienna
Favourite cuisine: Italian food
Favourite Movie : Scent of a Woman
UAE currency: the story behind the money in your pockets
Company Profile:
Name: The Protein Bakeshop
Date of start: 2013
Founders: Rashi Chowdhary and Saad Umerani
Based: Dubai
Size, number of employees: 12
Funding/investors: $400,000 (2018)
Red flags
- Promises of high, fixed or 'guaranteed' returns.
- Unregulated structured products or complex investments often used to bypass traditional safeguards.
- Lack of clear information, vague language, no access to audited financials.
- Overseas companies targeting investors in other jurisdictions - this can make legal recovery difficult.
- Hard-selling tactics - creating urgency, offering 'exclusive' deals.
Courtesy: Carol Glynn, founder of Conscious Finance Coaching
The specs
Engine: 6.2-litre V8
Power: 502hp at 7,600rpm
Torque: 637Nm at 5,150rpm
Transmission: 8-speed dual-clutch auto
Price: from Dh317,671
On sale: now
ICC Women's T20 World Cup Asia Qualifier 2025, Thailand
UAE fixtures
May 9, v Malaysia
May 10, v Qatar
May 13, v Malaysia
May 15, v Qatar
May 18 and 19, semi-finals
May 20, final
The specs
Engine: 2.0-litre 4cyl turbo
Power: 261hp at 5,500rpm
Torque: 405Nm at 1,750-3,500rpm
Transmission: 9-speed auto
Fuel consumption: 6.9L/100km
On sale: Now
Price: From Dh117,059
Specs
Engine: Duel electric motors
Power: 659hp
Torque: 1075Nm
On sale: Available for pre-order now
Price: On request
ALL THE RESULTS
Bantamweight
Siyovush Gulmomdov (TJK) bt Rey Nacionales (PHI) by decision.
Lightweight
Alexandru Chitoran (ROU) bt Hussein Fakhir Abed (SYR) by submission.
Catch 74kg
Omar Hussein (JOR) bt Tohir Zhuraev (TJK) by decision.
Strawweight (Female)
Seo Ye-dam (KOR) bt Weronika Zygmunt (POL) by decision.
Featherweight
Kaan Ofli (TUR) bt Walid Laidi (ALG) by TKO.
Lightweight
Abdulla Al Bousheiri (KUW) bt Leandro Martins (BRA) by TKO.
Welterweight
Ahmad Labban (LEB) bt Sofiane Benchohra (ALG) by TKO.
Bantamweight
Jaures Dea (CAM) v Nawras Abzakh (JOR) no contest.
Lightweight
Mohammed Yahya (UAE) bt Glen Ranillo (PHI) by TKO round 1.
Lightweight
Alan Omer (GER) bt Aidan Aguilera (AUS) by TKO round 1.
Welterweight
Mounir Lazzez (TUN) bt Sasha Palatkinov (HKG) by TKO round 1.
Featherweight title bout
Romando Dy (PHI) v Lee Do-gyeom (KOR) by KO round 1.
UAE currency: the story behind the money in your pockets
Emergency
Director: Kangana Ranaut
Stars: Kangana Ranaut, Anupam Kher, Shreyas Talpade, Milind Soman, Mahima Chaudhry
Rating: 2/5
World Sevens Series standing after Dubai
1. South Africa
2. New Zealand
3. England
4. Fiji
5. Australia
6. Samoa
7. Kenya
8. Scotland
9. France
10. Spain
11. Argentina
12. Canada
13. Wales
14. Uganda
15. United States
16. Russia
TRAP
Starring: Josh Hartnett, Saleka Shyamalan, Ariel Donaghue
Director: M Night Shyamalan
Rating: 3/5
Roll%20of%20Honour%2C%20men%E2%80%99s%20domestic%20rugby%20season
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Company%C2%A0profile
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