Market Update. What goes up...
Following a prolonged period of low volatility, this week we are seeing a sell-off across global equity (and bond) markets.
Below is a summary of our current views and the broad strategies we’re employing.
What is causing the sell-off?
No single event but the catalyst appears to have been investors becoming increasingly concerned over increasing interest rates in the United States.
What investments have been hit hardest?
Whilst the sell-off has been widespread and indiscriminate, it has particularly centred on areas of the stockmarket that have seen the strongest returns such as technology shares.
Should investors be worried?
At present, the sell-off is best viewed as a healthy correction. Investors had started to become a little complacent (and forgotten markets go down as well as up) so an increase in negative sentiment is not a bad thing in our view.
The UK stockmarket is currently trading more than 10% lower than the peak reached in the Spring, leading to more attractive valuations. Less demanding valuations will provide opportunities for those who can invest without being fixated on short-term market fluctuations.
Keep calm and carry on
Whilst (unlike Donald Trump) we are not in the habit of calling central bankers crazy for raising interest rates, our view remains that any interest rate increases are likely to be cursory going forward, due to a lack of sustained inflationary pressure and fragile economic growth outside of the United States. This should support asset classes, that can provide more attractive returns the miserly return that is provided by holding money in cash.