By Caroline Anstee, Managing Director of Anstee & Co.
Many clients are opening their quarterly investment valuations or looking online (not too often I hope) to see that the markets are extremely volatile and have been for nearly seven months now.
So, what is going on?
Well, they call it the perfect storm, in the first quarter of the year (January – March) we had rising inflation, rising interest rates and the war in Ukraine, however consumers were not directly affected at first and therefore there was still an air of confidence. During the second quarter (April-June) it started to weigh on consumers and it knocks the broader confidence globally. Central banks moved to tighten monetary conditions rapidly to prevent high price pressures by increasing interest rates. However, the continued war in Ukraine is hitting households with rising food and energy costs.
As household incomes fail to keep pace, a cost-of-living crisis is at the core of concerns around waning consumer demand. These factors will continue to exert pressure on global growth, with the equity (share) market falling out of favour with cyclical stocks i.e., sectors that follow the cycle of expansion and recession (Hotels, Leisure, Airlines, Construction, Luxury goods) and preferring defensive sectors i.e., sectors that usually underperform in expansion but keep going through a recession (Utilities, Health care, Telecoms, Discount retailers). Bond prices (Government bonds, Gilts) sold off dramatically at the beginning of the second quarter but, after the Federal Reserve in the US expedited its pace for tightening, found some support in the end.
What is our view?
Our view is that the markets will remain volatile for some time yet as they don’t like uncertainty, however, the investment houses we recommend are managing the investments and tweaking where necessary. We keep in constant communication with them.
Investments are for the medium to long term and depending on where we are on the economic cycle perform in different ways as you will see through history, that is why reviewing regularly and having expert management is so important!
How Anstee & Co can help you.
We are here to explain what is happening and for reassurance. Please speak to your adviser who would be happy to help should there be any concerns.
Finally, the information contained in this article is for information purposes only and does not constitute financial advice. Anstee & Co. is authorised and regulated by the Financial Conduct Authority (FCA).