Whatever your political allegiance, 2019 looks set to end on a positive note. As the year comes to an end, Chartered Financial Planner and Business Development Manager, Chris Bull, gives us his take on the markets this year.
As the year draws to a close, 2019 has delivered a positive response to the challenges experienced at the end of last year. The year has rewarded many investors, with equity portfolios registering returns well into double digits, led by a resurgent US market. Even cautious investors have enjoyed a stellar year thus far.
Before popping the champagne corks, there is of course an election for markets to navigate, before the year can be declared a triumph.
Much of the surge in markets enjoyed this year represents a recovery from last year’s falls – but not all. Many investors who rode out the fall have been rewarded, and now happily sit in profit.
What about the election?
The election, a late entry in the year has markets second guessing outcomes on policy and (of course) Brexit implications. Perhaps despite preconceptions, links between past election results, and market performance have been hard to spot. It tends to be wider global economics which dominate, as opposed to whether a ‘red’ or ‘blue’ win will reside in power. Perhaps the Brexit implications associated with the election mean that this time really is different?
A Conservative majority and subsequent Brexit deal, in reality leads to further negotiating with the EU, as the end of the current transition period looms in December 2020. Whereas a Labour majority, introduces the potential for radical nationalisation, higher taxes and public spending, and another ‘peoples vote’ - a volatile mix.
What does the future hold?
I recently had the pleasure of hosting an interview with Steven Bell, Managing Director and Chief Economist for the fund management group BMO Global Asset Management. He commented on the recent Citigroup prediction that the FTSE100 would move through the 8,000 point barrier in 2020. Steven felt there is every chance this might be possible, but it was equally likely markets fall 10% in the meantime. The potential for market growth from this point remains, but the inherent volatility associated with investing remains.
Herein lies the message – invest for the long term, and the short term noise becomes far less relevant. When investing, patience rewards, whilst being fearful can lead to missed opportunity.
When investing through volatility, there are steps which can be taken to help ease the weight of the timing decision and add some comfort.
A long utilised approach when investing cash is to phase into the market at an agreed schedule. Perhaps unsurprisingly given Brexit in the headlines, we have seen more of this approach recently. Whilst you do not enjoy the full return in a rising market, you have at least taken part, and it saves the angst of deciding when to make large capital investments.
Another comfort is to invest in a diversified, well managed, and tactically capable portfolio. This helps diversify away specific investment risks, leading to be a better risk adjusted return
Some investment portfolios will align to different asset types in a manner which is static, instead focusing on buying quality companies. Other portfolios will move in and out of different markets in a more dynamic fashion, looking to achieve tactical advantage. It is important to understand your options in this space, and the various pros and cons, to ultimately ensure that your portfolio is aligned to your expectations, objectives and needs.
At Kellands, we regularly assess client portfolios to ensure they are properly aligned to navigate markets, in a manner suited to the client’s needs. Being privately owned and extremely well-capitalised enables us to focus on what is important – our clients – with no conflict of interest. To see how we can help you or your clients, get in touch today.
Please note that past investment performance is not a guide to the future performance. Potential for profit is accompanied by the possibility of loss. The value of investment funds and the income from them may go down as well as up and investors may not get back the original amount invested. Any figures provided are for illustrative purposes only and are not guaranteed.
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