01.02.2019
Reflecting on January
WHAT SHOULD YOU TAKE AWAY FROM IT?
January’s strong performance provides further evidence in support of our view that it is very difficult to try and call the direction of financial markets over the short term. As referenced earlier, there were considered to be a number of significant risks to equity markets during 2019, and investor sentiment at the turn of the year had become increasingly bearish based on a number of metrics. The S&P 500 had just recorded its worst performance during December for more than 30 years as had the MSCI World. So the turnaround has been significant in January and would have been missed by investors who sold following December’s weakness.
Whether this rally continues throughout the year remains to be seen, however, we expect that there will be bouts of volatility and market swings either higher or lower that surprise investors. We therefore continue to advocate taking a long-term approach to equity investment. Those invested in the equity market should have a sufficiently long time horizon to ride out these bouts of volatility, and, rather than trying to predict short term market movements, we recommend searching for companies that stand to benefit from exposure to structural growth opportunities, and for those that run high-quality businesses with competitive moats that should be able to perform well through the economic cycle.
Please speak to your Investment Manager for any further information.