The best way to scare me is to put me on a rollercoaster. Call me a control freak but I spend the whole time wondering if the tracks may have come loose, or whether my safety bar has been properly maintained.
The worse part of a rollercoaster for me is the upwards rise, as you know any minute your carriage is going to lurch over the top and spiral downwards from a greater height than you started.
Markets have felt a bit like this over the course of January. 2022 has not had the best of starts.
This is down to two main factors – fear and greed.
On the fear side, the whole world has been eyeing Russia’s intentions towards its neighbour. Oil prices are usually driven far higher by the prospect of war. This in turn hurts the global economy as rising oil prices feed the inflation gremlin. Inflation has been made worse by the revert to lockdowns due to the Omicron variant. This has put continued pressure on the supply of goods when we expected to see pressures easing. All of this has given global markets the jitters.
On the greed side, markets are throwing ‘taper tantrums’ over the withdrawal of the central bank stimulus that they were receiving throughout 2020 and 2021. You may recall that central banks such as the Bank of England and The Federal Reserve stepped in to prop up markets with huge rafts of extra money during the pandemic. It is a wonderful signal that these central banks are now saying ‘hey markets – you don’t need this false stimulus any longer’. However, markets are greedy for stimulus, so they are currently going ‘cold turkey’.
I have been in this job for nearly 25 years. I have lost count of the amount of times that markets have encountered fear. I also strongly recall the taper tantrums of 2012 when central banks tried to unwind the stimulus they had laid on to counter the great financial crisis. We’ve been here before.
However, this doesn’t mean that we are not watching our clients’ portfolios and fully sharing their frustration at seeing losses from such a high place last year.
Indeed, we have decided to move forward our next quarterly review to the middle of February to see if we can ‘tweak’ anything at all within our treasured clients’ portfolios.
We are very proud of the way that our portfolios have held up in recent weeks when comparing them to indices like the American Nasdaq or Dow Jones. We also have been staggered by the amount of clients wanting to push new money into the markets. This is always a very good sign.
In our opinion, this is a short term drop. It is horrible to watch, but ultimately we are 100% confident that recovery will follow. I shall be in touch around the 18th-21st of February with your quarterly review.
In the meantime, we are here for you if you have any questions or worries. I am quietly very optimistic about the outlook for markets and our clients’ portfolios.
My very best wishes indeed. Darren