Investment Process

I am writing this market note following the one which was issued in December 2013 as we have seen some very high volatility in markets generally as we passed through the first few weeks of the New Year. We read every day headlines about how much the UK Economy is improving and yet the market has fallen through January and given back the entire year-end rally. This can be seen in the chart of the UK Market below.

FTSE 100 Daily Chart

FTSE 100 Daily Chart_100214

The US market has fared better. I mentioned that the market volatility would most likely increase and the market would in its outlook become much more short term.  We were right to sell our emerging markets exposure last year, but it is the fear that weakness from these markets may spread into the developed major markets that has caused this reversal. The market is moving higher with quite big waves between highs and lows. It is tempting to look at the very short term and lose sight of the bigger picture, but we feel happy for the time being to remain fully invested.

Contrast the negative tone of the market on this daily chart with the weekly one over a longer period.

Here you will quite clearly see the impact of the financial crisis in 2009 since 2012 the longer term trend of market looks very positive. We have to watch these markets very closely on a daily basis but we shouldn’t lose sight of the fact we are investing with a 3 to 5 year view and although these periods can impact quite dramatically on 3 to 6 month returns, longer term equity markets are where you will secure the longer term returns. However it has become a feature that the price swings are now quite large and tend to come in a very short space of time. Sentiment changes very rapidly in both directions. We expect to see it improve somewhat over the next quarter.

The short term challenges continue but we do put a lot of time into selecting investment managers for the asset mix we want and the ones we currently own are of very high quality.

FTSE 100 Weekly Chart

FTSE 100 Weekly Chart_100214

So we want to reassure you that we think this period of weakness will pass very soon now and markets will enjoy some short term recovery. If we feel the picture is deteriorating we will look to take some risk off the table again. This may well happen through the summer; again it’s too early to tell yet.

I will issue further short term updates if there is a significant shift in our view of the market.

For those of us old enough to remember Corporal Jones in Dads Army ‘Don’t Panic! Don’t Panic!’ springs to mind.

If you have any queries please contact us.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply