For some time now most local and global asset class valuations have been trending towards their long-term averages from historical starting points which have been quite expensive. While this is a painful experience as asset classes de-rate, it is a necessary part of the investment journey and has been illustrated consistently over many investment cycles. Investors often call this ‘mean reversion’, simply meaning that cheap assets should go up in price, and expensive assets should go down in price.
2018 was a rather rude reminder as to how quickly this mean reversion can impact investment returns. This is shown clearly in the medium to longer term, where the average investor in a local balanced fund has lagged money market since 2016 over a three-year horizon, and has recently dipped below money market over a five-year horizon. Please find attached article to provide perspective and guidance for the year ahead – Investment-outlook-2019