After a fairly turbulent week in the markets we wanted to give our views on what this means for our clients’ portfolios.
Global equity markets have seen falls over the week, at the time of writing indices were between three and six percent down from the start of the week.
As one of our more witty colleagues commented this week when asked about the falls “They do that sometimes”.
The global economy faces lots of potential ‘landmines’ in coming months and years; the unwinding of QE, the various threats to the Eurozone, a China – US trade war, the President of the United States twitter account to name a few. But a very important thing to remember is that there are always threats ahead, and the markets can sometimes get spooked by them (taper tantrum, inflation fears etc) but these periods of volatility are par for the course when investing in equity and are the cost of the long run returns which we expect equity to keep delivering over the long term. We are sitting looking back on an exceptionally long bull run for most equity markets and we have seen that combined with a number of years of historically low volatility. Falls of the level we’ve seen this week should be expected when we hold equity and with the potential for more turbulence in the coming years we should avoid knee jerk reactions to them.
Bad decisions have just as big a potential to cause capital losses to portfolios as short term market movements and so we take any portfolio decisions very seriously. If and when we believe there is cause to move some money we will do so in a material way backed by a high conviction view. For the moment we are very comfortable to ride out this period of volatility.
As and when we decide to change any allocations our advisers will be on hand to explain exactly how and why. Until then clients can sleep well knowing their portfolio is invested in a suitably diversified way to help them meet their long term goals. Short term periods of volatility are part of that investment journey.