October has seen a sharp fall across global stock markets; US markets are down around 7% and European markets have lost 5.5%. Meanwhile, in the UK, the FTSE100 has dropped 5.25%.
On the plus side, bond markets have been stable, strengthening slightly over the month. However, in general, this has not been enough to offset the fall in stocks.
There have been a plethora concerns of used as a reason for the downturn in stock market fortunes. Some of the main ones are as follows:
- Rising interest rates that could make corporate and consumer borrowing more expensive;
- A slowdown in global economic growth,
- Earnings figures for the big tech companies (e.g. Amazon & Alphabet) coming in below expectation;
- U.S. mid term election uncertainty;
- Seasonal October volatility;
- Worries that the U.S. economy is in the late stages of expansion and due for a recession;
- Italy’s budget crisis;
- Looming end of quantitative easing in the Eurozone;
- The health of emerging market economies.
As ever, many investors are acting on impulse and using geopolitical concerns as a reason to sell. This is exacerbating the falls that we are seeing.
I know it is not easy, however, my advice, as always, is to try and ignore the ‘noise’.
Holding an appropriate asset allocation, that is aligned with your willingness and ability to bear risk during periods of volatility is key.
It is important to remember that uncertainty and volatility is a natural part of investing. Sticking to the goal and ignoring the ‘noise’ will ultimately lead to a better investment experience.
If the current volatility is making you uncomfortable, it is possible that your portfolio is not aligned with your risk profile. Feel free to contact me for a review.