Finally, a reversal in fortunes
This week has seen global growth stocks recover some ground as institutions and traders make the most of lower prices. The S&P 500 (US) over the last few days has risen by over 5% and this has reflected in an increase in portfolio values (up until Thursday of this week).
In light of recent turmoil, I thought it pertinent to share with you some of the content from an excellent communication we have received, once again from our investment partners, LGT Vestra:
- Peaking inflation:
With inflation looking like it could peak during 2022, we would expect inflation to start to fall and this has historically been beneficial for the healthcare sector, an area of the market we have a large exposure to. Again, irrespective of interest rates, the healthcare sector earnings are more stable than the wider market and offer a level of protection to portfolios. Ultimately, there will always be people that need treatment and healthcare, regardless of economic fluctuations.
- Avoiding value traps:
They go onto state that gyrations between growth and value received plenty of attention during 2021 and we have seen another value rotation this month. However, it’s important not to tie ourselves up in knots over these short-term moves.Value stocks have historically been favoured in recessions but given that unemployment levels are at low levels and labour market tightness remains, this suggests that this rotation may again be short lived.Secondly, the global economy is still constrained by Covid related supply chain issues and as these pressures begin to ease, this should be economically supportive and thus gives us an indication that a recession is unlikely to be on the near-term horizon.
These pieces of information give us comfort in the current positioning of the portfolios, despite the very short-term weakness. Although share prices have undoubtedly been impacted, it is important to separate short-term fluctuations in share prices from fundamental business quality and growth, both of which continue to look strong.
Wise words indeed!
Education, education, education
Investing is clearly not an exact science. It is complicated and as we all know, sentiment can change very quickly. When it is all going well it looks easy but when you meet choppy waters, it’s important that you are navigated by an experienced crew! Particularly so if your lifesavings and retirement are dependent upon it.
At Blue Sky, we see it as a privilege to look after your money and take our responsibilities very seriously. Where possible we try and provide context and work hard to highlight the changing dynamics in an easy-to-understand manner. In our experience, there is no doubt that readers of our Weekly Updates are typically less concerned in times of volatility than those that don’t… except of course for those who don’t read anything at all about the economy or markets and so are completely unaware.
Then there are the self-investors!
A new report by the Financial Conduct Authority (FCA), entitled, understanding self-directed investors (produced by Britain Thinks), found that 45% of self-directed investors, defined as those “who are making investment decisions on their own… without a financial adviser”, do not view ‘losing money’ as a potential risk of investing.
Staggering! A real concern amidst the rising appetite for crypto currency and other high-risk assets.
Quarterly Update
Our longer Quarterly Economic Update has been delayed by a week because of all the turmoil in the markets but, the most important content I have shared with you already. However, it is always worth understanding the individual views of our strategic partners so I will provide the Quarterly Review next week.
Have a great weekend, |