I was asked recently whether we should just sell everything in light of the uncomfortable first quarter we’ve just experienced, but rather than shut the door after the horse has bolted, I’m always minded to look for the positives, whilst remembering a lesson learnt early in my career: time in the market is often better than timing the market.
The FTSE 100 index has suffered since its high of over 7,100 last year for a variety of reasons, many of which have been hyped up by the usual sensationalist media, the root cause of which, in my opinion, is a huge sell off of the equity markets by the Sovereign Wealth Funds, as a result of the low oil price.
However, amidst the gloomy global macro picture, there are positives which mustn’t be overlooked; the falling Pound has been good news for UK stocks who export and overseas investments; interest rates are likely to remain low, somewhat longer than previously expected; and the relative valuation of companies is now below long-term averages.
Even oil at around $30 a barrel, which affects multiple industries, has a positive knock-on effect, with less spend at the pumps creating the potential for an improvement in discretionary consumer spending, despite there being little evidence of this so far. Additionally, it’s worth remembering that institutional investors and hedge funds are selling a variety of asset classes and these monies are likely to find their way back to the markets.
So amongst the plethora of bad political and economic news from around the world, including a struggling London residential property market, I’d suggest that not only should investors not sell everything, but the recent sell-off offers a buying opportunity for those investors willing to take at least the medium-term view. And of course, if you are not invested the likelihood is you’ll miss the turn when it comes.
Our priority, as ever, is to ensure we retain the service levels for our clients; key to this is providing appropriate support to our investment managers allowing them to stay focussed on events as they occur. Clearly our firm’s earnings are directly linked to the stock market and clients’ portfolio valuations so we share the anxiety at times like these. At a management level we have to ensure we maintain suitable cost controls, which is tough in an environment when the cost of doing business is on the up, so that we have the necessary resources to continue delivering on our promise of providing a top quality, personalised investment management service.
This edition of Prospects provides some commentary on the possible effects of a Brexit and I would also like to draw readers’ attention to the article on page 19 about the recent change in taxation on dividends, which has started to bite already, further compounding investors’ plight. Let’s hope a change of season brings with it at least a renewed sense of calm.
Published by JM Finn & Co on 11th March 2016
Image credits: Shutterstock images
Jon Berkeley/Debut Art
Jon Berkeley is a renowned illustrator who regularly contributes to publications such as The Economist.