With plenty of talk about the global economy and Brexit at present, we do not wish to regurgitate more of the same commentary that many client investors will already have received over recent months.
It is important to remember, that predicting future events correctly, or how the market will react to future events, is difficult. A key part of a good long-term investment experience is being able to stay with your investment philosophy, even during tough times. A well‑thought‑out, transparent investment approach can help people be better prepared to face uncertainty and may improve their ability to stick with their plan and ultimately capture the long-term returns of capital markets. This is very much key for the year ahead as we see a number of potential threats to global markets.
In short – these are as follows:
Further tightening of Central Bank liquidity. The US Federal Reserve raised rates by 0.25% this morning and the European Central Bank has confirmed that it will cease its own asset purchases at the end of December. In short, if money is more expensive and there is less of it being created, this can create a headwind for financial assets.
The enduring influence of politics. Politics is seemingly playing an increasing role in investment decisions. You do not have to look far but clearly Brexit and Trump antics are having a detrimental impact on global markets and further fueling uncertainty. Trump’s personal crusade against China and this perceived economic threat is a political issue that is unlikely to get resolved quickly.
The threat of recession, with equities having already suffered a sizeable pounding over recent months as they begin to discount in valuations. However, the general consensus with many economists and fund managers with whom we have spoken to of late, the more likely outcome for 2019 is a deceleration in global markets rather than a recession, but with continued political interference and tightening of liquidity giving rise to increased volatility.
Whilst the picture ahead may not be overly rosy, it is believed by many within the industry that volatility can also give rise to investment opportunities over the medium to longer-term. With this in mind, we are constantly reviewing client portfolio holdings and for new monies being invested we may seek to ‘drip-feed’ monies into a carefully constructed portfolio in order to take advantage of dips in the markets and thus benefit from ‘pound cost averaging.’ Imperative that client holdings remain diversified and we also believe a combination of passive and active funds will continue to work well within client portfolios.
It is also important for our client investors to know that we are always at hand, and here to field any queries from clients, more so now over the next 12 months as we constantly monitor the markets. We would also like to remind clients to remember to review other investments they may hold elsewhere, to ensure these are equally balanced and in keeping with their overall investment strategy.