Despite Michael Buble instantly coming to most people’s minds … some of you may know that this song was in fact originally first recorded by Nina Simone (in 1965) followed by England winning the World Cup in 1966 (both before my time … just!) … so what did the 60s bring in the financial world? The FTSE All Share was launched in 1962 and ended its first year at 97.52, with the FTSE 100 following much later in 1984. After a fantastic year in the markets in 2017, concern about inflation has kicked in, creating the recent storm (in a teacup) on 5 February 2018 in the markets. Robust growth in Europe and Japan also raised the question of when the European Central Bank and Bank of Japan would begin to remove crisis-era stimulus which has supported equity markets’ rise. As I write this on 27 February 2018 the FTSE All Share sits at 4015.93 (it was 3946.27 a year ago on 27 February 2017) and the FTSE 100 at 7289.27 (7253.00 on 27 February 2017). We were due a market correction, but nobody knew when. Now with that behind us let’s consider how to navigate the markets in 2018.
Smooth Sailing from here?
As much as I’d love to say yes, the reality is that this recent sell does herald in a new era. It marks the end of the artificially low-volatility world that has prevailed over the past few years. Low volatility has been the norm for nearly three years, but moving forward volatility will remain elevated relative to what investors have come to expect. We need to remember that this is merely a return to historical norms in global stock markets. As the experience of the 1990s shows, equities can still go up when volatility is trending higher, but this is going to make for a much more challenging investment environment.
It’s too early in 2018 to start looking for trends, but I believe currency movements may have a big impact this year. Global bond yields remain quite low by historic standards so this should continue to support stock market growth.
If you have a five to seven-year view from here, the February dip will ultimately be insignificant in the rear-view mirror. An active manager may well feel it is warranted to increase exposure to global risk assets now, taking advantage of the falls in prices … as the legendary investor Warren Buffett said ‘BE FEARFUL WHEN OTHERS ARE GREEDY, AND GREEDY WHEN OTHERS ARE FEARFUL’.
Don’t try to time the markets
Investing is about turning time into money through the patient harvesting and reinvestment of dividends, which are themselves the result of having identified companies with strong competitive positions, pricing power, good margins, competent management, sound balance sheets and strong cash flow. The benefits of compounding dividends take a number of years to emerge, so patience is key.
Don’t change things just for the sake of it … but make sure you understand what you are invested in, including the possibility of harm or injury within your investment portfolio
There is a natural human bias towards action when it may not be necessary to do anything at all … sit on it! Take a moment to consider your asset allocation, portfolio construction and investment strategy going forward, and I don’t mean your Bitcoin exposure!
As a matter of interest and most spectacularly, Bitcoin buyers have encountered trouble. The cryptocurrency has stuck to the script outlined by market historians who looked at prior market bubbles such as seventeenth-century tulip bulbs and twentieth-century tech stocks.
Bitcoin has plunged from $18,000 to $6,200 and the total loss on all 1,500-plus cryptocurrencies listed on coinmarket.com has reached over 50%, or $350bn in 2018 to date.
If the stock market gyrations earlier in February made you feel uncomfortable then it is possible you have unwittingly taken more risk in your portfolio than you really feel comfortable with. Spend some time housekeeping and reviewing what you have in place.
Speed Financial Solutions are a highly qualified financial services provider on the Costa del Sol looking after clients throughout Spain and the UK. We provide a discreet and comprehensive service to individuals, our service is tailored to your needs taking advantage of tactical opportunities as they arise in respect of your investment planning. We seek innovative solutions for our clients and employ our skills, based on many years of experience, to apply tax legislation to our clients’ advantage. Our relationship with clients is built on trust and mutual respect. We are accessible and approachable, and ready to answer your questions, giving you the confidence you want when dealing with a sensitive issue such as discussing your pensions, investments and savings.
Our Principal, Andrea Speed, is a Fellow of the Personal Finance Society (PFS) which is the professional body for the financial planning community. The PFS is part of the Chartered Insurance Institute (CII), which is the world’s largest professional body for insurance and financial services in the world.
Fellowship is the highest qualification awarded by the CII and is universally regarded as the premier qualification. It is a major achievement in the financial industry and demonstrates the acquisition of skills and knowledge at the highest of levels.
Along with a Fellowship, Andrea is a CII Chartered Financial Planner specialising in Taxation and Trusts.
Please take a look at our website – www.speedfinancialsolutions.com for further information and contact us (Tel 951 315 271 or 951 318 529) – we are happy to discuss your own situation in more detail. One of our advisers would be pleased to spend some time with you either in your home or at our office to review your current savings, investments and pensions, so do call to make an appointment. Our Financial Review is completely free of charge and without obligation. Follow us on Facebook for regular updates.
Andrea J Speed FPFS(DM), M.A.
Principal, Fellow and Chartered Financial Planner
Speed Financial Solutions
27 February 2018
Please note that the above does not constitute advice to invest – you should seek independent financial advice before investing.