The last 7 days have seen the world’s stockmarkets suffering volatility levels last seen in the summer of 2011. It is well documented what is causing this volatility – China, however as I have recently stated there are other concerns in the world as well. So have we seen the end or the so called bottom of the market? Well probably not, but who knows. You see, because these questions are not really that important if you are a long term investor. They are only important to people trying to make a quick buck.
All doom and gloom, really?
The global economy is not in that bad a shape. Sure there are concerns about a slowdown in China. But we have to get this into perspective, by slowdown we mean the Chinese economy or GDP slowing to around 6%pa. There are some western economies that would welcome a ‘slowdown’ of that proportion. In the US they are talking about interest rate rises, simply because the economy is continuing to recover. And in Europe things are recovering nicely. The Japanese economy is also coming along well, and is providing plenty of growth opportunities. So it is far from doom and gloom.
So why are markets like Special Forces? Well as you know the SAS shoot first and ask questions later. And in my opinion the financial markets react to bad news in very much the same way, in fact they tend to overreact, and literally the losses can appear like a bloodbath. And when the news becomes fully available and people have had chance to look calmly, the markets start to adjust, usually upwards. And I have absolutely no doubt that this will be the case this time also.
It is only a problem of course if you need your money right now, and if you don’t then sit back and don’t worry, because it will all be alright in the longer term.
Long term approach.
Couple of points I wanted to share with you. I am on holiday on the Algarve at the moment, and Declan and Sharon are ‘holding the fort’ superbly. But I asked Declan today, the 25th has he had to speak to anybody concerned with the volatility in the markets, and his reply was no. Not a single person. Maybe I am preaching to the converted then, even as I write this. But on a serious point, and many of you are aware of me saying this in the past. But when the markets are making television news because the screens are all red, let me give you a piece of advice regarding your client websites? Don’t look. Stay off them for a while. Honestly, sometimes you are better off not knowing.
As always, stay the course!