The sharp sell off in global stock markets is no surprise to me. I have been pessimistic for some time and especially so in recent weeks. My October Watching Brief anticipated the problems that would come from rising US interest rates and better returns from medium dated US treasury stocks. Morningstar published a video yesterday saying almost exactly what I wrote at the start of he week. There is some consensus that the sell off is for genuine logical reasons, an actual change in the underlying facts, not just the need for a ‘correction’ to bank profits and so on.
October is often a month when markets get jittery and I have said to many clients when I was an adviser that I always see October and January as the two most risky months for investors. 
So, is this just volatility that can be safely sat out? It depends of course on your investment time horizon and cash flow needs. As I explain in articles elsewhere on the site, all investment planning objectives need to be assessed in terms of the need for cash flows. So, if you have not prepared for a sell off and you are going to need cash in the near term, your adviser ought to telling you to get on with selling investments that are rich with decent gains as soon as possible. If you have an adviser, give them a ring now. If you are running your own portfolio, it is time to assess the risks carefully.
Of course, I don’t believe that you should sell your whole portfolio in the hope of buying back into markets at a lower price. That sort of ‘timing’ speculation only ever works if you get lucky. Not even the best investment managers in the world can consistently sell near the top of markets and buy at the bottom. But if you do raise some cash now and don’t need to extract it for spending later, you will have some liquidity to pick up any bargains that come along if there is a real rout.
The market pendulum always swings too far at the end of the cycle, both up and down. So a swing down into a bear market will be overdone, at some future date. Then we can all look to new money making opportunities – there are not many to be found at the moment.
You must be logged in to post a comment.