It was shaping up to be a quietly reasonable 2018 for markets until October, when significant volatility spread across all regions. So, for many investors, last year was a challenging period.
There wasn’t a single, over-arching reason for the recent downturn. But one key moment came early October, when the US Federal Reserve chair – Jerome Powell – stated interest rates were a long way from neutral, indicating more US interest rate rises were likely. The spectre of a series of further interest rate rises troubled markets. It would become even more expensive for individuals and businesses to borrow money, which could add more fuel to a slowdown in the US economy.
Another contributor was the ongoing trade conflicts between China and America. This began in 2017, when US President Donald Trump imposed tariffs on billions of dollars’ worth of Chinese products – and has prompted increased uncertainty amongst global markets, weakening confidence amongst investors.
Elsewhere in the world, fears towards the end of the year over a slowdown in Germany, and problems amongst the French and Italian economies, contributed to weak European shares – with ongoing uncertainty over Brexit clouding the UK outlook. Emerging markets also endured a difficult year, partially led by the US interest rate rises – which have contributed to a strengthening of the US Dollar against many currecnies – as well as a slowing Chinese economy.
When shares experience a period of under-performance, other asset classes can often produce positive returns to balance it out. But unusually over much of 2018, the other key asset classes – such as fixed income – broadly experienced its own challenges.
Patience is a virtue
Whilst experiencing market volatility can be difficult, it’s important to remember that markets fall as well as rise – they always have, and, in all likelihood, always will. It is merely part and parcel of the overall investment process.
If your investments have been negatively affected by current market activity, the wisest course of action you can do right now is to take a step back, keep calm and focus on the sole reason you’re investing. It’s all about being patient and remembering investing is a long-term commitment.
In other words, the key is time in the markets – not timing. So whatever markets are throwing at you right now, staying invested for as long as you can could prove highly valuable – and help you achieve the return you need to achieve your long-term goals.
Scott Ashworth, Skipton’s Technical Research Manager, explained, “It wasn’t a great year, with the level of market volatility in December unusual for that time of year – particularly in the US.
“Whilst these short-term dips happen, over the long-term, markets have typically moved upwards and generated positive returns. This is a time when patience is an important trait for investors.”
Here to offer support
If you’re feeling concerned at all over current market activity, we’re always here to offer you extra reassurance and guidance.