As you may be aware global markets have been correcting due to recession fears in the US. We have over the last 2 years warned of this in our newsletters when outlining that key yield curves were inverted. The message we wish to pass on is not to panic and sell since if you sell any unrealised loss will be crystallised.

The next important point is that as you continue investing into equity markets, you would be buying at lower prices. This is called dollar cost averaging down and is a normal element of a regular investment plan. In time markets bottom and the unrealised losses are clawed back when the economy turns. The S&P500 took about 4 years to return to pre-crash levels following the 2007/8 Global Financial Crisis (GFC). However, by continuing to invest while the markets are down means that you receive the benefits of compounding and potentially magnify your gains once equity markets recover.

During down turns companies continue to pay dividends albeit at lower levels. This is often overlooked by the media. Dividends provide the cashflow necessary for reinvesting.

Most of you have cash/term deposits in your portfolio which can be used to further invest (dollar cost averaging down). Buying opportunities will present themselves, so when they do arise it will be time to act reasonably quickly. Everyone always wants to pick the bottom of the market; however, this is rare and visible only in hindsight. It is for this reason that time in the market is better than trying to time the market.

For those in pension phase can use their cash/term deposits and future dividend income to meet draw down requirements. This means that there is potentially no need to sell your existing investments subject to the duration of equity market correction which we cannot predict.

We continue to monitor the global economic environment and geo-political developments closely and will let you know if we believe that you should further invest into equity markets.

Finally, when the “herd is fearful it is the time to be fearless”.

If you wish to discuss, please let us know.

General Advice Warning: Any advice or information provided is general advice only and has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any General Advice provided, you should consider the appropriateness of the advice, having regard to your own objectives, financial situation and needs. If you wish to discuss the contents of this newsletter, please do not hesitate to contact us.