Market Slump Is Time For Investors To Hold Their Nerve

Lisa Smith, BA (Hons), CeFA

Toppling share prices have left a sea of red in their wake as markets around the world have followed each other into a downward spiral of disaster.

The sell-off was triggered by the US Federal Reserve hiking interest rates.

The concerns over more rate rises have heightened with the release of the Fed’s rate setting meeting revealed members agree borrowing costs in the US need to rise.

The repercussions of the decision have spread around the world’s financial markets, with stock prices plunging.

But leading investment advisers say now is the time to buy rather than sell.

Sea of red

Nigel Green, CEO of the world’s largest independent financial advisory firm deVere Group, explained the market drop is an opportunity for investors.

“There’s a sea of red across all major indices worldwide as global markets hit an 8-month low, following Wall Street’s worst day in months on Wednesday, with fresh losses expected,” he said.

“This major sell-off would not have taken most investors by total surprise. With rising interest rates, a contracting labour market and rising oil prices, this readjustment was all to be, to some degree, only a matter of time.

“Other triggers included the rising bond prices, escalating trade tensions between the world’s two biggest economies and concerns about valuations as we head in to earnings season.”

Key opportunity

Green also cautions investors to ensure their portfolios are balanced across assets, sectors and geographical regions.

“In times of volatility, this is the investor’s best weapon to mitigate risk and to take advantage of the opportunities that present themselves,” he said.

“Indeed, as always, many investors will be using this sell-off as perhaps one of the last key buying opportunities of the year.”

The markets have rebounded from the slump, but geopolitical factors are holding them down, such as the US trade war with China and the threat of an upset with important trading partner Saudi Arabia.

The continuing uncertainty over Brexit is also constraining prices in London as negotiations are deadlocked and the prospect of a ‘no deal’ are becoming more likely. The FTSE 100 continues to hover around the 7,000 mark.

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