As I write this update, I am very aware of the recent turmoil and voting on numerous amendments within the UK parliament. Whilst a Brexit deal is still elusive, it does seem MPs are beginning to focus on the deadline.
From an investment perspective I can’t help but feel the 29th March date will be a welcome deadline. Investors do not like uncertainty and although most remain focused on the long-term it is impossible to not be caught up in the short-term hype.
To reiterate some of our recent market updates, Brexit is arguably only a small contributor to the recent dip in stock markets.
Since September the financial markets have been much more focused on global influences such as the US-China trade war, interest rate movements worldwide and the slowdown in China’s economic output.
There are some signs appearing now that investment markets have taken these factors into account and fund managers are starting to look forward with a more positive outlook.
In the short term there is likely to be some volatility, much of which could be caused by reactionary changes in currency exchange rates, but we are confident these fluctuations will even out over the medium term.
The key questions faced by most investors are twofold; do you need to be worried, and/or do you need to take any actions.
In terms of whether to be concerned, I would suggest you need to remember why you are investing. Typically, this is for capital growth over the long term. Although investments can involve fluctuations in values along the way, over-time investment growth overcomes these hurdles. I would advocate being patient, let markets fluctuate and wait for the recovery.
The second question is possibly more pertinent; now is not the time to take flight and come away from the stock market as this will only crystallise any losses without any potential to benefit from any recovery. Equally, I do not feel that the current dip is so severe as to encourage a buying opportunity for pure equity funds at the cost of more cautious asset classes such as bonds or property. The ideal portfolio construction should be a balance of asset classes and a variety of underlying investment funds.
Fortunately, our clients are mostly in well balanced portfolios of funds and we regularly review these to ensure they still meet with individual risk profiles investing over the longer term.
I would like to reassure clients to be patient and wait for markets to recover.
In the interim, contact us should you have any queries or worries. Our team are always happy to have a chat.
Martin
Feb 2019