There are a number of things that are happening around the world at the moment which are ultimately having an impact on investment portfolios.
As we have all seen over the years, the markets are very sentiment driven and whilst there is uncertainty around, it is inevitable that we will see ups and downs in the value of even the best managed investment portfolios.
The events that we see as having an impact at the moment are as follows:
- Although appearing to have had a rally in recent weeks, the FTSE 100 is still exhibiting intraday swings of between 1% and 2%. In America, the market with the biggest global impact, the S&P 500 is down by around 10% over the last month and the Nasdaq down by nearly16% over the same period.
- Not only is there a down-turn in America, but all of Europe has seen a sharp decline with the uncertainty around the Russia-Ukraine border with the likelihood that things will get worse before they get better. (European markets are down between 5% and 8% year to date).
- Russia is the world’s third-biggest producer of both wheat and oil. Prices of both commodities have soared recently, with the fear that sanctions could push prices higher. Ukraine is also a big wheat and corn producer. Europe sources 35% of its natural gas from Russia so any restriction could further inflate natural gas prices.
- Inflation has increased in the UK, with the current CPI inflation figure rising to 5.4% (7.1% for RPI). Not only is this impacting on the cost of living, but it has also impacted fixed interest values. Increasing interest rates to tackle inflation has resulted in a fall in capital value within fixed interest.
- Interest rates in the UK rose by 0.15% in December 2021. The Federal Reserve in the US are now preparing to raise their interest rates, with the expectation this will happen in March with talk of two further rises in interest rates in the year ahead.
- Chinese Stock markets are down 5.5% year to date, the Evergrande fallout continues to have an effect, despite share prices creeping up since trading resumed in Hong Kong, though they still have a way to go to make up their 75% loss from 2021.
There will, no doubt, be more volatility due to events such as those highlighted above, but the global relaxing of Covid rules, stronger economic data in the US and government spending on infrastructure, will all help to stimulate growth.
Looking at the government’s recent announcement with regards to future funding of nuclear power, it looks likely that we as a country are potentially looking at a long term solution to our energy supplier issues.
At Face to Face Finance, we have a robust strategy for our fund selection process and speak regularly to the fund managers that we trust to run our client’s money. We are not great believers in knee jerk, short term change, just for the sake of it, as we have to take a longer term view, an approach which has benefitted all our clients. Our latest email confirmed that we will not be making any changes to the funds within the client portfolios at this time. However, rest assured that we will be very closely monitoring the funds to ensure that they remain the right ones for you.
Those clients who are paying into plans on a monthly basis, will be taking advantage of buying the lower priced units, and benefitting from what is known as “pound cost averaging”. Equally, many of our most experienced clients are seeing this as an opportunity to invest.
At the risk of repeating a quote from the great Warren Buffett, that many of you will have seen in visits to our office, “be greedy when others are fearful”.