2018 got off to a rocky start with the markets despite the S&P 500 having its best one-month performance in January since March 2016.
The global equity sell-off has been building since last week when markets become concerned by the prospect of tighter monetary policy after the US posted strong average earnings data. Deep losses during Monday wiped more £27 billion (€30.4bn) off the value of London’s blue-chip stocks. US markets closed higher on Tuesday night and European markets opened stronger on Wednesday but with losses again this morning.
We are nine years into an equity bull run which could justify a more cautious investment approach; however many of the signs are still suggesting that the run will continue, with some corrections along the way.
2018 should be a good year on the global economic front. Bond yields should rise a little, but will still remain low; and apart from the US, official interest rates are not likely to rise very much. Global growth looks positive and inflation remains steady. However, valuations remain high and we are approaching the end of quantitative easing.
It is not possible to know for sure where the market will go from here. We do know that volatility looks set to remain high. With uncertain times ahead, it may be worthwhile taking a more cautious approach to invest. Our key message is always the same; ensure you have a well-diversified portfolio that is suitable to your own risk profile and never panic. Investment decisions should be taken with a solid long-term investment strategy in place.
We strongly recommend that you review your current portfolio and undertake an updated Risk Profile Questionnaire. Please contact us if you wish to wish to reassess this or discuss the above in more detail.