The Rollercoaster of Investor Emotions

If stock-market investment could ever truly be likened to a rollercoaster ride it would be now as we have recently experienced sharp falls and rises in global stock-markets largely due to investor sentiment as the potential impact of the deepening sovereign debt crisis and worsening economic data is revealed.

It is worth reminding ourselves that many of the companies that we invest into remain in excellent health. Debt levels are generally low, unlike during the financial crisis of 2008, and many companies are still producing decent profits. In the US, for example, the vast majority of the US companies in the S&P 500 index have now reported earnings for the second quarter of 2011 and 72% of those have exceeded analyst expectations. They are understandably cautious on the outlook but this does highlight that there are companies out there that are still doing well.

Furthermore, with western economic growth under pressure, Asia had been the popular area for investment until recently. Investment in these areas has slowed down recently amid concerns over countries such as China not being able to successfully control their faster growth rates. However, over the long term Asia and the Far East can still be seen as an area with much potential for future growth.

Gold has been favoured by investors in recent months, as its price has increased as investors have sought perceived safe havens. However, with the current price of approx $1,700 having nearly doubled in the past 3 years there is a concern that this price may be somewhat high and therefore investors should be cautious of putting new money into this area in the short term.

Notwithstanding the above daily fluctuations of markets; which can indeed test the nerves, we at Loughtons are very keen to ensure we carefully consider client investment objectives. In particular the reasons why they invested, the potential timescales of the investments and the appetite to risk and reward that they are prepared to take, to ensure that the investments currently held are appropriately aligned to their goals and objectives now and in the future.

As you know we always look to stress the importance of diversification of your investments and this will be beneficial to you as the overall impact of market changes takes hold. You are reminded that investments are medium to longer term by nature and indeed investment of time as well as capital is a requirement for any sensible investor.

If you need more help managing your investments and strategy in the current climate, please get in touch on 01626 833225