Volatility has returned to the stock market…so what happens now?
Paul Gilsenan, Principal of Paul Gilsenan Wealth Management, a partner practice of St. James’s Place Wealth Management looks at a tumultuous few days on the stock market – and what it means for the average investor.
Anyone investing post-2009 may be forgiven for thinking that share prices only knew one direction.
Unprecedented levels of sustained growth resulted in the S&P 500 being up 5.6% in January and just five months short of the longest bull run in history. The FTSE 100 has risen 187% while the S&P 500 has surged some 284% in sterling terms.
Now the market is starting to resettle to a ‘normal’ rhythm (i.e. volatility is returning) and the headlines are full of woe. So, is it time to be hitting the panic button and worrying about a relapse of the dark days of 2008?
Far from it.
Realistically, the current situation in the markets is somewhat overdue. Even the most optimistic of investors has recognised the upward trend could not continue at such a level and, reassuringly, the falls in global equity have come on the back of strong economic news.
All things considered, the global economy remains stable, great news for investors.
What this situation does highlight is the need for sage and active wealth managers who can spy the opportunities within a market that is in a period of change. Dips in the market can bring opportunities for those well-poised to strike.
The key lies in building up a great relationship between manager and client, having confidence that a portfolio is being handled by someone who not only understands the investment but the investor themselves. This bedrock of confidence can enable clients to feel at ease when the waters start to get choppy. Rather than be spooked by headlines of plunges, drops and lows, investors should be able to pick up the phone and get a clear picture of what it all means for them.
It is worth noting that, at the time of writing, the S&P has enjoyed its best day since November 2016. Volatility will always be part of the equation but having a solid figure on your side can help make it all add up long-term.