We held our quarterly investment committee this week and would like to share our conclusions with you.
We signalled at the end of the summer that the risks were generally increasing in the markets, with local politics, geopolitics and the threats around trade tariffs to name a few.
We saw a correction earlier this year in February through to April, which we felt was not a cause for concern given the strong performance by many asset classes from the middle of 2016 to January 2018. During that correction, most asset classes fell together.
The correction we have seen over October was of a different nature, where specific parts of the markets were targeted, such as Technology companies and others that are of a higher growth style. This was broadly due to a more aggressive stance by the US Federal Reserve, which has unsettled the markets because we may see higher US interest rates than previously forecast. The Bank of England have also signalled that they may need to raise interest rates soon and the European Central Bank is looking to raise rates next year. Some Asian economies are also in this process.
This collective approach has the potential to contain global growth and so certain parts of the markets could come under pressure, as they have done over October.
The falls we have seen have been quick and excessive and virtually all markets now appear to be poised for a recovery. However, due to the change in tone from the Fed, we feel it is appropriate to ease back on some of the more sensitive parts of our portfolios. You should, therefore, expect to hear from us in the coming weeks, where we will look to sell some of our equity exposure as the markets recover.
If you have any questions in the meantime, please feel free to get in touch.