I ended up turning more cautious on the outlook as the post-vaccine optimism around a 'roaring twenties' for markets seemed misplaced with inflation picking up and the first signs of labour tightness (remember the petrol tanker shortages?) leading the Bank of England to start raising interest rates.
Despite reality turning out far worse than my expectations, with the war in Ukraine pouring fuel onto the inflation fire, today I am far more excited about the opportunity in UK equities than I was a year ago.
Have we already passed peak perceived risk in the UK?
Not because the fundamental outlook is improving – it is tough and getting tougher – but because this is now a widely accepted view.
Newspapers are full of gloom and doom; workers are on strike and previously upbeat government ministers are telling us to brace for a tough winter.
Importantly, from an equity market perspective, this means share prices are starting to reflect this reality. As a result, we are seeing selective opportunities to pick up high-quality businesses at attractive prices.
Having cut cyclical exposure earlier in the year, we have reversed course and begun adding exposure to companies whose share prices have performed poorly through 2022.
So where are we finding opportunities? Despite the FTSE All Share being one of the best-performing equity markets, delivering a positive year-to-date return with dividends included, this masks significant divergence between constituents.
For example, within the portfolio we have strong performers like Shell up 50 per cent while Next and Domino's Pizza are down 25 per cent and 35 per cent respectively.
Given we have not revised our long-term views on any of these companies we have begun moving capital out of Shell and into holdings that we believe are already discounting the extremely tough outlook for the UK consumer economy.
Will Next and Domino’s see their earnings forecasts come under pressure over the next twelve months? Absolutely.
Will their share prices remain volatile? Probably.
Are they good value on a three to five-year view? Absolutely.
The key thing to remember in these challenging times is that the falling share prices of companies with a poor near-term fundamental outlook are making them more attractive investments.