And just like that, we’ve ploughed through half of 2022 already. I wish I could attribute the swift passage of time to the joyride it has been. Alas, no matter whether you look at geopolitics, macro, or markets, it has been anything but. A raging war next door has made us painfully aware of our vulnerability and forced us to reexamine our priorities. Suddenly, like scared children, we are scrambling to secure the bare necessities. We need to feel the comfort of food, energy, and the protective embrace of a strong ally.
Of course, such neediness does not come for free. Inflation, for one, is spiralling. Big central banks’ taming attempts through interest rates hikes look more and more desperate. Politicians, meanwhile, are walking a tight rope. There are principles to uphold and promises to keep, but then there are disgruntled potential voters to appease, if they are to ever get reelected. Or they can be left with no choice than to jump off the rope altogether.
Even financial markets, as the imperfect mirror image of the world that they are, have hardly been a suitable playground for the fainthearted lately. Global stocks have lost twenty per cent in six months, the worst start to a year on record. Admittedly, MSCI’s 47-country world stocks index has only been around since 1990. Not much of a record, if you ask a fixed income manager. 10-year U.S. Treasury bonds, meanwhile, have had their worst first half since 1788!
Naturally, there are winners. There always are, in the markets, as in life. Which brings me to my sustainability point (in case you were wondering), as the winners during this particularly turbulent half year are no others than our good old fossil friends, oil and gas. Brent crude oil futures are up more than fifty per cent and natural gas still more, competing only with the VIX (the notorious volatility gauge) for the first prize among major global markets so far this year. Yup, fossil fuel producers are having a day in the sun.
And if any of you, sustainability nerds, are wondering which villain out there is cranking up the price of oil and gas again to make them so highly desirable, it’s all of us, the collective investment community. While at it, you might as well ponder another, even more bizarre fact. Consider the Russian ruble. A brief and steep fall directly after Putin’s invasion of Ukraine was, namely, followed by a remarkable recovery, making the war-stained ruble the best performing world currency in 2022 so far, up almost forty per cent. “To make yourself very rich over these difficult last six months, all you needed to do was put two trades together,” writes Bloomberg’s senior editor John Authers. “If you used bitcoin to buy rubles at the beginning (a profit of almost 250%), or especially if you did so at the ruble’s nadir in March (460%), then hats off,” he adds, ironically, I hope.
It’s enough to make me weep. It seems that no matter how much we talk about responsible investing, swear ESG prudence and preach sustainability principles, our investment world is still as cynical as ever. Profits trump any ethical or environmental considerations.
I’ve tried hard this year to walk on the bright side of sustainable investing, picking up positive news wherever I could find them and keeping my spirits up despite the mounting clouds of war, climate disasters and a host of disappointments from politicians and regulators. I need a break, though, if I’m to keep it up in the second half. Let us all use the next couple of weeks to reflect and regroup, or simply relax and enjoy the summer. The coming months will, no doubt, test our resilience further.
