Uncertainty on world markets

World stock markets continue to be nervous after the roller coaster ride of recent weeks. A global wave of selling and falling prices, which saw all this year’s gains wiped out, followed by a rebound in Europe and then more falls has left many wondering what will happen next.

After the corrections in April and October last year, markets subsequently recovered their upward momentum, and there are already signs emerging of some stability beginning to return this time.

Some analysts expect volatile trading to continue. Others predict the declines may be short-lived, while yet others speak of a period of consolidation rather than a rapid recovery.

Why has this happened?

The headlines point to:

• fears that markets had become overheated – this is a correction to more realistic levels
• worries about inflation and the resultant interest rate uncertainty
• high oil and gas prices
• this year’s rise in bond yields and the weakness of the dollar
• uncertainty about how central banks are going to interpret the numbers
• a general sense the authorities are less likely to help markets out in future in terms of monetary policy
• the geo-political concerns in countries such as Nigeria, Iraq and Iran
• concerns about the impact of all this on consumer confidence.

A long-term commitment

We believe it’s important, where possible, to take a long-term view when investing. Looking back over the years, volatility has always been a feature of world stock markets, with each setback followed by a recovery – some taking longer than others. One of the best and most accepted ways to deal with volatility is to invest for the medium to long term – a period of at least five to eight years.

It’s important to find the right product and invest in the right funds, which depends upon your investment objectives and attitude to risk. If either has changed, your adviser will help you review your plan to make sure it continues to meet your needs. Although we can’t give you investment advice, we do offer a wide range of funds suitable for almost all investment objectives and attitudes to risk.

We strongly recommend you speak to your adviser before making any changes to your plan.