Chapters Financial Market View

The autumn of 2014 has kicked off with additional market turbulence due to many factors, each affecting sentiment in different ways. With market values falling at the time of writing this blog (10th October), I wanted to provide our blog readers with some views on the current conditions. 

Chapters Financial continues to advocate diversification of investment assets, with clients maintaining cash positions with other assets to cover unforeseen circumstances. Investors should hold risky assets only in the proportions they would be comfortable to maintain for the duration of a downturn, if this was to occur. 

Two issues that are causing the markets to focus in unison with each other are as follows.  

• The first is that, the Federal Reserve (Fed) will make its last purchase of treasuries and mortgage-backed bonds in October. When the first phase of Quantitative Easing (QE1) was paused in America, US equities fell, the same happened when the second phase was paused (QE2). With this current third phase now ending (QE3), we have seen US equities markets reacting with new falls. 
• The second factor is what some perceive to be relatively high equity market valuations. A possible correction of values to draw in line with historic norms (these are obviously not guides to future performance). 

Other factors, such as the various current geo-political situations, have a bearing on market sentiment and I cannot see this changing in the very short term. Europe remains an economic problem and we have advocated a small/limited allocation to this investment area for some time. Other areas, such as Japan, continue to weigh on investment returns and are actively avoided where possible. 

With investment diversification, the risk of exposure to volatility can be reduced, but not extinguished. We still see yields (dividends as an example) remaining high in coming months. The Chapters Financial view is to remain invested and to allow these issues to move through the system. This may mean that we see further volatility ahead; however, any overreaction may well cause detriment. 

If you would like to consider the points noted above further then please do not hesitate to contact the team at Chapters Financial, who will be able to help you further with your pension enquiries. No individual advice is provided during the course of this blog. If you would like to receive further information regarding your own individual situation and circumstances, please contact the Chapters Financial team in either Guildford or Woking.

Keith Churchouse BA Hons FPFS
Director, Chapters Financial Limited
Chartered Financial Planner
Certified Financial Planner
ISO22222 Personal Financial Planner

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.