Bulls & Bears
Market returns do not always follow economic growth the last five years has been possibly the worst economic period since the second world war. Yet over this same period markets have rallied strongly and some would argue signs of sustained economic growth has also returned, the international monetary fund (IMF) predicts the UK will be the fastest growing developed economy in 2014, with 2.9% growth.
What does this mean for stock markets?
It could be worth considering rebalancing your portfolio by adding funds to those assets that have not performed as well these areas could provide exceptional value for any investor who has a well-constructed, diversified portfolio.
What is the evidence?
Majedie investment managers recently conducted a study looking at the US stock markets performance over the last sixty five years the conclusion was that the average bull market over this period was sixty four months with an average return of 163%. The current bull run market is sixty two months with gains of 200%.
It is very important to remember all these figures are averages there are some bull and bear markets that have lasted longer and shorter than this period.
The UK market is similar in that since the low point in 2009 the FTSE All Share Index has risen by 138%.
How much further can markets rise?
This is an important question one which does not have an adequate answer and we are not about to put our head on the block and more than likely get it wrong when the economists and central banks get it wrong more often than not.
After all this year so far economic data has been strong and positive but markets which is where clients make their money have been subdued.
So what is the answer?
We do not believe you can reliably time markets meaning that we have but nor does anyone have a reliable way of predicting when markets will rise and when they will fall, investment managers like discretionary wealth managers often describe themselves as investment experts it is hard to defend their self-proclaimed expertise when they also cannot reliably outperform markets.
By remaining diversified through asset classes, using evidence base research with frequent rebalances and not reacting to every market “wobble” can in the long run prove the most reliable strategy.
Active management is quite a recent invention, historically investors would hold an asset for the long term and give little regard for the inevitable market volatility and would only realise the investment when the goal was achieved. Speak to us.
We have been using evidence based research since our inception; our portfolios are built using a range of asset classes and through global economies achieving optimum diversification. We frequently rebalance our clients’ portfolios to ensure risk levels are maintained and desirable and taking advantage of value that appears as markets develop.
Keep your eye on the prize!
We also provide you with a financial plan built around cash flow analysis this powerful technique predicts what you need to invest and for how long and the level of risk you need to accept to deliver on your goals.
This means you do not need to take more risk than is necessary and you do not need to invest and expose your capital to risk for any longer than is necessary rendering the boom and bust cycle redundant.