Our Investment Update

“The biggest sell off for global stocks in two years,” according to Bloomberg. Some of the other headlines included, “Stocks May Tumble 10%” and “European Stocks Slide for 6th Day as Selloff Catches Up to US”.   Yes, the comfortable bubble of complacency got poked with the sharp pin of surging bond yields.  All of a sudden, sentiment seems to have turned.  Reading some of the comments over the last few days, equity investors are, apparently, “in for a further stomach-churning down-draft.”  So how worried should we be?

Let’s be quite clear – we don’t think this is the beginning of a bear market yet. There is still plenty of good news out there.  The global economic backdrop remains solid for now.  The geo-political stresses of recent years have moved more into the background.  And the current results season is showing that companies are delivering good results to their investors.  So where we are invested, we plan on staying invested.  We have no intention of trying to micro time a pull back in equity process when our medium term view remains positive.

That still hasn’t answered the question, though. In fact, it rather smacks of the same complacency we mentioned earlier.  Are we simply ignoring things?  Absolutely not.  In fact, we have warned that a correction was likely for some time and, as recently as last week, said we felt uncomfortable and that investors should hold tight.  Whether this is a full blown correction or not, frankly who knows.  If it is, a pull back of five to 10% is still not enough to make us want to risk a whippet-quick exit nor to attempt to jump back in whenever we think things might have bottomed.

In the immediate future, sentiment may become a self fulfilling prophesy. Bad news may lead to fewer buyers and more sellers and see prices fall further from here.  If they do, where we have cash to deploy we will be looking for buying opportunities.  It may be a bit too soon right now so perhaps not quite yet.  But we do not plan on trying to be too clever.  Nor do we plan on being too worried.  Focussed, yes.  Cautious, yes.  But worried? Not yet.

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