11th October 2018
Bond and Stock markets worldwide are reappraising why they have risen so much in recent years. Trade wars, interest rate rises, the pairing back of QE are creating a changing environment for those who manage money, and change always makes markets nervous.
We only have to think back to 2015 when concerns about the Chinese economy and its subsequent currency devaluation saw market volatility slide in the FTSE 100 of roughly 15% over six months, but six months later it had recovered these loses and went on to another period of strong growth. The shake out of recent days has taken back of these gains.
Volatility is a feature of markets, we expect it and plan for it when we build portfolios. We use different styles of managers with different views of what is happening in the world and balance these to get a balance of opportunity and volatility moderation. Indeed fund managers we have had in the office this month are sitting with cash to take opportunities market turbulence creates. So looking at our low to moderate portfolios, whilst some funds have fallen more than others, portfolios overall are down around 2.5% per cent which is under half of the 6% loss the FTSE 100 is showing at present. This is the power of diversification and we believe this changing environment will throw up opportunities for active managers.