A brief summary from the leader in the Economist. If your returns this year have been crap - welcome to the club!

The pain has been intense. The s&p 500 index of leading American shares was down by almost a quarter at its lowest point this year, erasing more than $10trn in market value. Government bonds, usually a shelter from stocks, have been blasted: Treasuries are heading for their worst year since 1949. As of mid-October, a portfolio split 60/40 between American equities and Treasuries had fallen more than in any year since 1937. Meanwhile house prices are falling everywhere from Vancouver to Sydney. Bitcoin has crashed. 

The article does go on to suggest that from such lows the future returns should improve!

The downside of higher prices was lower expected returns. By symmetry, this year’s capital losses have a silver lining: future real returns have gone up. This is easiest to grasp by considering Treasury Inflation-Protected Securities (tips), which have yields that are a proxy for real risk-free returns. Last year the yield on a ten-year tips was minus 1% or lower. Now it is around 1.2%. Investors who held those bonds over that period have suffered a hefty capital loss. But higher tips yields mean higher real returns in future. 

To return to @Stuey s point;

As the scales tilt from newish firms and towards old ones, seemingly burnt-out business models, such as European banking, will find a new lease of life. Not every fledgling firm will be starved of funding, but the cheques will be smaller and the cheque-books brandished less often. Investors will have less patience for firms with heavy upfront costs and distant profits. Tesla has been a big success, but legacy carmakers suddenly have an edge. They can draw on cashflows from past investments, whereas even deserving would-be disrupters will find it harder to raise money. 

Picking whether the forward-looking market has fully priced in the expectation that investors will choose companies with guaranteed cash flows vs anticipated ones, is where we are at!

Lastly, as all financial pundits seem to be echoing: “this is a stock-pickers market” where index trackers will not be able to recreate the performance of the last decade where cheap/free money “lifted all boats”.

So, if I’m correct, the message is: be earlier and cleverer than everyone else and you’ll be fine!

Simple.