Adviser giants urge calm despite investment ‘sea of red’

Investors have been urged not to panic but to diversify portfolios and look out for opportunities as global markets plunge according to advisory firms.

Both international advisory giant deVere and UK retirement and investment specialists AJ Bell have moved to kwell potential concerns as the markets plunged into the red across the last couple of days

As the global stock market sell-off spreads across the globe, investors should “ensure their portfolios are properly diversified and look out for buying opportunities,” according to Nigel Green, CEO and founder of deVere Group.

As the US Dow Jones fell 830 points, the UK’s FTSE is in market correction territory hitting a six-month low, European markets hit a 20-month low, and in Asia the Nikkei fell by 4 per cent, amongst other major indices also falling, Green, pictured left, noted: “There’s a sea of red across all major indices worldwide as global markets hit an 8-month low, following Wall Street’s worst day in months on Wednesday, with fresh losses expected today (Thursday).

“This major sell-off would not have taken most investors by total surprise. With rising interest rates, a contracting labour market and rising oil prices, this readjustment was all to be, to some degree, only a matter of time.

“Other triggers included the rising bond prices, escalating trade tensions between the world’s two biggest economies and concerns about valuations as we head in to earnings season.”

Green believes that this latest sharp global sell-off should serve as a “timely reminder” for investors to ensure that their portfolios are properly diversified across assets, sectors and geographical regions.

“In times of volatility, this is the investor’s best weapon to mitigate risk and to take advantage of the opportunities that present themselves,” he said. “Indeed, as always, many investors will be using this sell-off as perhaps one of the last key buying opportunities of the year.”

AJ Bell
Russ Mould, AJ Bell investment director, pointed that a five-day losing streak, capped by the worst one-day fall in America’s S&P 500 index since February, has “seen investors asking themselves whether this is just the ‘healthy correction’ so beloved of market commentators or the beginning of something more serious”.

“While it is tempting to describe stock markets as volatile, they are really nothing of the sort, at least by the standards of the last 20 years,” said Mould.

“Even allowing for Wednesday’s nasty slide, the S&P 500 has moved by more than 1% from open to close on a daily basis just 34 times in 2018 to date. While that is an increase on 2016’s soporific count of just eight times, it leaves the US on track for its quietest year, using this benchmark, since 2006.

“And although Wednesday’s 3.3% fall feels frightening, it is only the tenth daily open-to-close movement this year of between 2% and 5%, that pales next to 55 such daily rises or falls during the crisis of 2007 and 2008, or even the 34 such intra-day gyrations of 2011, when US debt was downgraded and the Greek debt crisis began to simmer.

The UK, points Mould, is “similarly becalmed”, looking at the FTSE 100 as benchmark, even if we have just had five straight days of open-to-close movements of at least 1%.

“That wobbly streak takes us to 42 daily rises or falls of more than 1% in the year to date,” he added. “This is more than the 17 seen in the whole of 2017 but still leaves the FTSE 100 on track for its second-quietest year since 2005.

“One of the most startling features of the global equity markets (or at least developed ones) is just how calm they have been this year. History (and the charts above) show this tends to be a good thing, as markets seem to do best during such periods of sustained calm.”

Gary Robinson
Head of Video and Ezines at Open Door Media Publishing. Deputy Editor, International Investment. An experienced journalist and filmmaker with more than 20 years' financial services experience, both as journalist and originally as a fully qualified IFA, Gary works across both International Investment and InvestmentEurope titles. Previous video production credits include projects on BBC, C4 and SKY.

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