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There is a feature in the financial markets that has not changed for decades now: downturns are always followed by upturns, but upturns are followed by downturns. Larger or smaller falls have also been experienced several times in the very recent past: in 2015, 2018 and 2020. They are experienced both by SEB and funds offered by Latvian financial market participants. This is a natural feature of the financial market, which is affected by a wide range of developments – from central bank policy, inflation, and national growth rates up to the performance of various companies.
This trend continues even today. The year 2021 was very successful – after a fall in March 2020 caused by the spread of Covid-19, we experienced a rapid increase in value for almost two years. The year 2021 was also a successful year for SEB investment funds. The year 2022 was a year of significant change and, unfortunately, this change was not always positive, with an impact on the economy and financial markets as a whole, as well as on each of us individually. The year 2022 started with a fall in financial markets, as investors switched from technology companies to other sectors, and continued with Russia’s invasion of Ukraine. In parallel, central banks changed their policies significantly, raising base interest rates. Also, Covid-19, especially in Asia, significantly affected and continues to affect the world economy. As a result, almost the entire year of 2022, with the exception of March, July, October and November, was negative. This affects the results of the financial markets and also investment funds in the short term.
No one can avoid short-term declines, but it should be taken into account that stopping contributions or terminating the contract at the time of a market decline can result in permanent losses, because then the savings are denied the opportunity to recover. It is also important to remember another important factor in building up savings – the long term. Most often, savings are built up over several years, even decades, so the impact of short-term fluctuations is not always as significant as it seems at the time we experience it. As the performance of the funds should be assessed over the long term, it is advisable to stick to the investment strategy chosen and only switch funds after careful consideration.
Your SEB Life and Pension Baltic SE
10.02.2023.