Money Matters

In it for the long term

Two things are uppermost on my mind, as I try to think of some nuggets to fill this column. Firstly, wishing that I had never brought up the subject of volatility! Nothing seems to have been steady in world markets for months, and as I write, the FTSE100 is some 10% less than when I wrote my last article (having only just recovered a little under 300 points from a recent low).

During the summer months, in what is often referred to as ‘thin’ trading – as volumes tend to be lower, market ups and downs are far from uncommon. However, the current world economic climate has meant that the customary excitability has been magnified a little more than somewhat. It may well be that this interesting state of affairs goes on for some while, unless there is some form of human intervention. Given that there are going to be elections in both the UK and the USA in the next few years, and the propensity for Governments to sweeten the electorate for a year or so prior to such elections, then such stimulus is far from unexpected. In fact, Barack Obama has just made a proposal for a new round of expenditure totalling some $447bn, designed to stimulate the US economy. If these proposals are agreed (and this is far from a foregone conclusion), then it may pour some useful oil on troubled waters. However, it may well not be enough to cure the malaise. Some commentators are saying that it could be 2013 before there is an appreciable upturn in major western markets.

The second thing is the 10th anniversary of the terrorist attacks on 11 September 2001. Events on that day may well have changed the world forever, but I knew little of them, being tucked away in the Royal Sussex County Hospital, where, as there were hushed rumours of a “terrible accident” in New York, my younger son, Sam, was born. It was only when I returned home, that evening, that the full enormity of the situation unfolded.

These events quickly caused havoc in world markets, yet 10 years later, despite talk of the “lost decade” and the current low levels of many indices, they are still broadly higher now than then. The FTSE100 is up some 20%, and the FTSE250 is up 85% (and fascinatingly, the Indian market is up over 400%). This highlights the fact that, irrespective of what the overall conditions may look like, there will always be success stories, some nuggets that will be discovered amongst the muck. There will be winners and losers in any field, and an index is very much an average picture of any scenario. Good stocks, and good funds will have made decent returns despite these uncertain times, and the mere fact that the ten years from 1 January 2000 were not inspiring – looked at as a whole, on average – should not detract from the perfectly respectable results that have been achieved by good companies and good fund managers. Don’t let the gloom merchants get you down. Look to the long-term, and trust those with a pedigree of producing consistent results.

That’s enough from me now, Winter draws nearer, I’m off to hunt some sloes.

David Foot

Categories: Money Matters

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