What do we make of it all?
There are so many moving parts out there with regards to economic data and markets, especially with the uncertainty around the conflict between Israel and Palestine. There are many mixed messages and, indeed, emotions, it’s easy to be caught up in the vortex of negativity. Another way to look at all this is that the lower the markets, the greater chance of a bounce back! It’s interesting when one looks back at conflicts and wars around the world in the past, how quickly markets tend to respond and bounce back. I’ll most likely include some details next week.
A bounceback may be coming, but it doesn’t help our emotions as assets fall in value now. It’s painful for sure, but this year has been characterised by significant lurches in values both upwards and downwards as news flow and sentiment has changed. Companies missing their earnings targets are suddenly being punished with significant share price reductions.
In this Weekly Update, we provide a perspective of how geopolitical conflicts typically impact investment markets and we talk about how the western world should not be viewed through one lens, as each economy has unique characteristics. We also give further insight into how portfolios should be positioned to ride out the storm and benefit from opportunities unfolding.
The agenda this week is as follows:
- A tough time for shares
- Winners and losers
- Different countries facing different dynamics
- The EU keeps rates on hold
- The UK economy is weakening
- Are bonds now the flavour?
- Weathering the storm
- Good news for pensioners
A tough time for shares
The ‘higher for longer’ rhetoric with regards to interest rates is meaning that companies that are missing their profit targets are being punished. As reported in ft.com only this morning, disappointing earnings and a weaker outlook is manifesting in unusually severe share price declines. Big companies like Alphabet have not been spared, its share price falling by 9% on Wednesday – its worst day since March 2020.
During the current third-quarter results season, stocks in S&P 500 companies, whose earnings per share fell short of analyst expectations, have dropped by an average of 5.5% in the days following their results, according to figures from FactSet. The five-year average is 2.3%.
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Please Note: This communication should not be read as giving specific advice regarding your personal circumstances. This would only be given following detailed assessment of your individual needs. The value of investments may fall as well as rise; you may get back less than invested. Past performance is not necessarily a guide to future returns.