Market Update

Prior to the coronavirus pandemic, financial institutions could rely on their tried and tested methodologies to deliver their long-term propositions for investors. It was a stable, and reliable framework aiming to provide capital appreciation for investors over time.  However, the arrival of Covid-19 changed all this, meaning institutions had to adapt to the changing dynamics of the world to provide returns for their investors.

It is likely that 2022 was seen by many as a chance to wipe the slate clean as the tables are slowly being turned on the pandemic, and the world treads a path back to normalisation as we learn to live with Covid-19.  Instead, we have already experienced bumps in the road through heightened volatility within the global markets, rising inflation and the political posturing leading to the very real threat of war between Russia and Ukraine.

There is no clear evidence that inflationary pressures have yet peaked, and there is no sound current market sentiment in which central banks will worry that financial conditions have deteriorated to such an extent that the broader economy is under threat. However, the results of heavy fiscal stimulus provided by central banks to help fight the effects of the coronavirus pandemic, coupled with supply chain demands for goods and services, will lead to continued inflationary pressure.  This has also resulted in market shocks as they contemplate the rising expectations of future interest rates by central banks.

Markets should be able to withstand a rates shock if earnings and dividends are growing steadily, even if the government leadership might change, following ‘partygate’. Although, potential changes to tightening monetary policy to try and circumvent inflationary pressures may lead to a “growth shock” which could result in further loosening of policy to ensure stability.

Well diversified portfolios should remain resilient through this period, and help to mitigate some risk, although there could be large differences between the performance of individual components within funds as the market continues to grapple with changes in the fiscal and monetary regime.  A cautious optimism is sensible should growth be able to remain steady, but this will be a volatile period; likely one of ‘stable insecurity’.

The primary benefit of the Integrity365 Centralised Investment Proposition is the access we can provide to world class fund managers and fund management companies. This incredibly diverse investment approach allows our clients to benefit from the collective knowledge and resources of managers who are responsible for billions of pounds worth of investments.

For any additional support with your investments in these turbulent times, or to discuss any details within this update further, please do not hesitate to get in touch with an Integrity365 adviser on 0117 450 1300.