Just when you think you’ve seen enough of elections and referendums, they’re starting to appear like busses.
Here we all go again!
It seems like only yesterday that David Cameron and Ed Miliband were battling for the keys of Number 10. Then, just as we all got our breath back, we had the EU Referendum.
Hot on Brexit’s heals, we then witnessed President Trump’s march toward The White House. Right now the EU is in the midst of it’s own electoral battles and Turkey is undergoing historic changes that may well bring about fundamental alterations to it’s constitution.
So with all that literally days behind us, Teresa May has now announced a snap General Election for June 8th.
So, what does it all mean for our investments?
Not so steady as we go.
We all know that the markets love stability and that we haven’t had very much of that recently, but things were starting to settling down. Granted there is the sabre rattling regarding Brexit and the UK’s future economic relationship with Europe – but there always has been.
It can’t be good for business though. As we all know that political uncertainty leads to a volatile market. However, we need to remember that political uncertainly doesn’t last, but the markets do!
It’s fair to say that changes in the status quo often disrupt the domestic and international markets, especially if the changes are unexpected or seem to signify a departure from the established order of things. Couple that with the fact that many observers are pointing out that the political and economic landscape of Europe hasn’t changed so much since the end of the Second World War. What is happening in the UK, Europe and America is huge and no one knows exactly where it will all settle. But settle it will. And when it does the markets will adjust themselves, dust themselves down and go about their usual business.
The markets love time more than politics.
Analysts tell us to take great comfort by looking back at long-term market performance. For when we examine how the markets behave historically, the further back we go the more we see steady growth.
In saying that, it doesn’t mean that growth was more assured or stronger years ago. What it means is that if we look at the markets over years rather than months, then the robust nature of investment growth becomes apparent.
It’s by looking back in time that we can clearly see that investments generally return the best options in order to grow a lump sum of cash. This knowledge should arm us with the confidence to look to retaining our market positions in times of uncertainty.
We may not all share the same politics, but we’re all in the same boat.
We are all facing uncertainty. We are all second-guessing the results of the General Election. What that will mean to Brexit? How will the victors navigate the UK on it’s maiden voyage as an Economic power in its own right?
But take comfort in the fact that the markets are used to uncertainty and they can cope with it way better than us mere humans. Just think of the markets as a reflection of life and society. They have their ups and downs and often face periods of calm certainty as well as violent change.
Our approach is evidence-based, long-term buy and hold, concentrating on getting the right mixture of risk and return for our clients. Essentially this is a ‘steady as she goes’ approach which avoids market timing or stock selection as far as possible since these have not been shown to add value. This has generally served them well over time. Unless people’s goals have changed, we do not advocate any changes in the levels of risk taken. We have already made changes to our portfolios to remove the bias to UK equities and these are being rolled out through our regular client review process. So we are not complacent but we do base our approach on our understanding of the long term behaviour of the markets.