This month:
Expert investment views:
Despite the current surface stability positively affecting global markets, there has been frenetic activity in the background, emphasising the need for balanced portfolios to reduce the impact of this volatility
Buying and selling investments along with trends and influencers because of a Fear Of Missing Out may not be the best way to plan for a strong financial future
Featuring this month’s experts:
1. Buffering with bonds
Insights from:
The world seems to move at an ever-accelerating pace, but even in the context of a turbo-charged cycle, a lot has been packed into the last three months.
The quarter was punctuated by rate cuts, rate hikes, escalating conflicts in the Middle East, a rapid market collapse and recovery in Japan, a surge in Chinese equities, leadership change across swathes of Europe, two assassination attempts, and a change at the head of the Democratic ticket that appears to have turned one-way traffic into a two-horse race.
The outcome of all this excitement resembled a proverbial duck on the water; steady returns from equities, bonds and portfolios but with plenty of frenetic activity under the surface.
We are acutely aware the outlook can change rapidly and that challenges remain given tensions in the Middle East, swollen government deficits and political uncertainty. This is precisely why we maintain balance across portfolios and are not ‘all in’ on a benign outcome
Markets have largely coalesced around the view we expressed earlier this year that the most likely trajectory was one where falling inflation would allow interest rates to be cut without major economic damage. This has proven a reasonable environment for investment, supporting a broadening out of company performance beyond the narrow leadership of big tech, supporting our diversified portfolios. Fundamentals look strong and we are constructive on the prospect for further growth, especially should financial conditions continue to ease.
We are acutely aware the outlook can change rapidly and that challenges remain given tensions in the Middle East, swollen government deficits and political uncertainty. This is precisely why we maintain balance across portfolios and are not ‘all in’ on a benign outcome.
Rosie Bullard
Partner – Portfolio Manager at James Hambro & Partners
Top Tip
Lee Goggin
Co-Founder
2. FOMO isn’t an investment strategy
Insights from:
We all feel a bit of FOMO from time to time. For me it isn’t the latest iPhone – I’m an Android guy, and an extra five cameras won’t do it for me anyway. It isn’t a desire for the perfect Instagram life – we all know that doesn’t exist. I usually get it from knowing my friends are doing something I’m not – a coffee, a drink, a holiday. I WANT TO BE INCLUDED!
Of course, when it comes to markets, the anti-FOMO recipe is the same, as the past few months have proved. Are central banks cutting rates? I should have owned BONDS! Indian wedding season combined with low-mine output? I should have owned GOLD! Rotating out of tech? Should have owned UTILITIES! Rotating back into tech? Should have owned NVIDIA! Surprise China policy announcement? Should have owned CHINA!
It’s always too late to act, though. By the time you hear about the next big thing, it isn’t big, and it isn’t next.
Diversification is maybe the least fashionable way to invest. But we know it delivers
So how to avoid FOMO? And always on the next big thing?
Well, the trick is simple. Own a little bit of everything. Don’t be put off because it’s unfashionable (baggy jeans are now BACK, baby). And don’t get sucked in because it’s fashionable (remember UGG boots?).
In the post-tech bubble 2000s, no one liked tech stocks. But they’re today’s favourites. Same with banks. And China. And miners.
Diversification is maybe the least fashionable way to invest. But we know it delivers. And avoids FOMO.
Ben Kumar
Head of Equity Strategy at 7IM
Important information
The investment strategy and financial planning explanations of this piece are for informational purposes only, may represent only one view, and are not intended in any way as financial or investment advice. Any comment on specific securities should not be interpreted as investment research or advice, solicitation or recommendations to buy or sell a particular security.
We always advise consultation with a professional before making any investment and financial planning decisions.
Always remember that investing involves risk and the value of investments may fall as well as rise. Past performance should not be seen as a guarantee of future returns.
