Hal Cook, senior investment analyst, Hargreaves Lansdown: “The last six to 12 months has seen a lot of market volatility. Much of this has been caused by politics rather than big shifts in economic data. Although, of course, politics and future economic data are intrinsically linked, so the market reaction has often been an attempt to predict the future impact on company earnings or interest rates resulting from the political wranglings.
This volatility has provided fund managers and professional investors with opportunities to buy and sell assets at potentially attractive prices. However, at a high level, most investors haven’t made big changes to the amount they have invested in different asset classes like shares or bonds.
Part of the reason for this is the greater level of uncertainty created by the political noise around things like tariffs. Sometimes the best option can be to do nothing, rather than try to take advantage of what appears to be a good buying opportunity. If you’re uncertain of the future, defining what a good buying opportunity is can be quite difficult.
One trend that is fairly common, however, is a desire to either reduce the proportion of a portfolio invested in North America, or at least not add any more to current amounts invested there. A recent survey by Citywire of 40 Model Portfolio Service (MPS) providers in the UK suggests that 26% of respondents are looking to reduce the amount they have invested in North American stock markets, and 32% are looking to reduce the amount of US Dollar bonds that they own. The same survey suggests that 31% of respondents are looking to increase exposure to European and emerging markets shares.
When we look at the mixed asset funds that we back on the HL Wealth Shortlist, the majority have chosen to make little to no change to their asset allocations, instead focusing on the specific shares or bonds they own. While a couple of our recommended funds have made some small changes to their asset allocations, the changes have been relatively limited. The one fund that has looked to take advantage of the market volatility in April this year was Troy Trojan. They reduced the amount invested in US and UK government bonds, added to the amount they have in shares and bought some Japanese government bonds.
For retail investors, the desire to want to ‘buy the dip’ and be quite active during periods of market volatility can be high. There are always stories of someone who managed to time buying perfectly at the bottom and many people suffer from the fear of missing out of these opportunities. But I think retail investors can learn a lot from their professional counterparts here; sometimes doing nothing can be the best active decision.”
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