Market Update Feb 2016
Feeling rattled by the markets? Consider yourself normal!
The markets so far this year have left many feeling rattled. In this guest blog Tim Noonan provide some insights to help calm worried clients.
The main thing to remember is that everyone feels rattled by the markets so far this year – so consider yourself normal! When the markets get messy, as they are currently, it’s generally because investors lose confidence in their ability to clearly see the future.
Loss of confidence in the markets has been catalysed by a general distrust of both the durability of economic growth in China (plus, frankly, a low level prejudice that the Chinese government isn’t the most objective and trustworthy source of information about the Chinese economy!). This has been compounded by investor confusion on how to interpret dramatic reductions in oil prices (optimists see in it a discount at the pump and therefore a buoyed consumer; pessimists see in it slumping revenues from the energy sector and higher junk bond defaults from idealistic entrepreneurs washing out. Can they both be right?
Finally – and most meaningfully, there is a legitimate concern that the long run of record corporate profits might be nearing its apex.
Typically, what we expect to see from this is an overreaction (look: the market is already coming back to its senses…). The key is to remember that investing for any one market environment successfully requires a crystal ball. If you haven’t got one, spread your bets. The diversified client is a smart client – one who knows that winning is a balance of getting it right and not get getting it all wrong over a long period of time. And that is exactly how we invest for our clients.
Our message today
We should all bear in mind that market cycles are normal, even helpful, but you need to view them in their totality, not one at a time, you can see that they are not only frequent but also idiosyncratic and unforecastable.