21st January, 2016
IC Quick Response: “Just Turbulence, Not a Crash”
In a response to current market conditions, this note is written with the purpose of reassuring and reaffirming the positioning of your investments. You will no doubt be reading that markets have started the year in a negative fashion, but please rest assured that we have been managing the Portfolios in anticipation of this, and will now use the opportunity that has been created to our advantage.
As detailed in our recent quarterly update, the current market movements, which may seem scary when you first see the headlines, are not representative of underlying economic progress. This is not a repeat of 2008 when we had a collapsing financial system, recessionary economies and virtually no liquidity. Quite the contrary, we have low and boring growth, a more stable financial system, and economies full of the liquidity that Central Banks have been pumping in for years.
The Portfolios have been positioned ready for volatility for some time; avid readers will note a continuation of our “cautious stance” for 18 months or more. The news will always focus on the stock market, which is only part of the composition of our Portfolios. Whether you have money in our Very Low Risk Portfolio, or our High Risk Portfolio, all are efficiently diversified, investing in all asset classes including equities, bonds, property and absolute return.
Preserving your capital is the key to investment management, as you create opportunities to buy into markets when prices are lower, having held your own value. Volatility, to this end, is not always bad. It can be of great benefit over the longer term, providing you were ready for it, and can keep your head when things are falling. We have achieved the first part of this process, and it will set the scene for growth moving forwards.