If you had been reading the news and had paid no attention to financial markets over the course of the first three months of the year, you would most likely expect that stock markets had crashed and we were well into a bear market. The truth is that global markets have been much more sanguine and ended Q1 slightly down (1.3% as measured by ACWI).
Some regions were positive over the quarter with Japan providing the largest gain as the falling value of the Yen boosted returns, while the UK market was also positive over the period. The make up of the FTSE (with little tech and commodity / energy tilts) meant that these stocks benefitted from the Middle East conflict.
The US market was the biggest detractor over the period (falling 4.3%), as technology stocks retreated even before the escalation in Iran as investors grew concerned over the capex of the megacaps (in particular) on AI, despite most companies meeting or beating earnings expectations.
Global bonds also fell slightly over the quarter as markets priced out interest rate cuts and began to price potential rises, on the back of expected higher future inflation driven by higher energy costs.
It can be easy to react to news headlines, particularly in today’s age where information is at our fingertips and algorithms favour shock or sensationalist headlines. The right thing to do as an investor is to ignore it and trust the plan you have in place.
Volatility is (unfortunately) part of investing and is the price you must pay to access market return. When you zoom out and look at the life changing returns the market can give you, it is a price well worth paying.
The team always welcome a chat about investment returns, so do get in touch via our Hook office, but the mantra will always be ‘invest and don’t look’.