We are not out of the Woods yet!
The December quarter brought an easing of inflationary fears as the US reported its first monthly decline in inflation since August 2021 This was reflected in lower US bond yields and stronger US equity markets, with the S&P 500 rallying 7 over the quarter Late in the quarter the inflationary outlook for Australia and Europe also appeared to improve which led to strength in their local markets

VIP’s portfolios ended the year well
VIP is pleased to report that over 2022 all of VIP’s blends outperformed their benchmarks, largely due to the VIP Australian Leaders portfolio which was up 1 55 beating its benchmark by 2 6 This was despite slight underperformance over the final quarter as our conservatively positioned portfolio rallied at a slower pace than broader markets VIP’s flagship Growth portfolio also performed well beating its benchmark, the Morning Star Australian Growth Index, by 7 7 The key performers for the VIP portfolios over 2022 were overweight positions in the USD (through to October), resources (especially lithium a key mineral in electric vehicle batteries),
financial and healthcare stocks VIP portfolios also benefitted from being underweight Europe, technology, real estate and discretionary stocks.

Economic uncertainty continues to prevail
While inflation is starting to look as though it may have peaked in some countries and continues to fuel US and European equity markets, we are not out of the woods yet! Inflation is likely to remain volatile and recession is now pressing with a multitude of data points that look concerning (especially US and European PMI data, non farm payroll data and the inverted yield curves) Some “ are warning of a deep and severe Northern Hemisphere recession VIP is not as concerned about Australia’s economy however, a deep Northern Hemisphere recession would see contagion.

Protecting capital continues to be VIP’s key focus
With the tilt from worrying about inflation to worrying about inflation and recession, VIP portfolios have been positioned to be more exposed to relatively safe bonds, while resources (such as Lithium, copper and iron ore) and financial stocks continue to be preferred over technology and discretionary stocks Consequently, despite the prospects for global stagflation (inflation and recession) VIP remains comfortable with the positioning of your portfolio and the prospects for 2023.