Save & Invest Financial Planning

Yet More Market TurbulenceNovember 2016

November 2015

With falling commodity prices and car makers reeling after the VW scandal many share indices have been hit .

Looking simply at the main indices can distort what is really happening for most investors. For example, the FTSE 100 has a significant number of constituents in the mining sector, affected by China's slowdown and the German DAX obviously has a number of car manufacturers, dragged lower by the Volkswagen scandal. Whilst these indices will be down more than others the concern has spread to most markets.

Many markets are down around 15% since April but this is not the case with well diversified funds which have fallen in general less than 5%.  This is not to understate the complex data markets and economies are trying interpret but we have experienced severe dips before and  whilst economic growth in the world is lower this year that was forecast at the start of 2015 most of the developed world is growing reasonably well. History also shows that when interest rates start to rise, stock markets also tend to be in a growth phase since both are responding to strengthening economies.  The fact that the USA did not raise rates last week as anticipated is a major driver of the current turbulence, making markets fear that growth is still fragile.  However rate raises seemed inevitable very recently and veteran fund manager,Richard Buxton said last week that he wanted a small rise just to prove the economy could cope and let the focus move off rates to more interesting matters.

Buxton also said that he is using this current "shake out" to increase his position in his favoured stocks cheaply and was convinced that after 15 years of going side to side, markets were entering a dynamic growth phase.

Our view is  that it is a time for patience and to look back at what, in previous times, followed significant falls. Indeed for the adventurous it is clear that equity based fund are cheaper than at most times this year and hence an opportune time to invest.  

 

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