Responding to the dramatic falls in world stock markets today, Gary Neild, Managing Director of Poole-based Blue Sky Financial Planning, said:
“This is no surprise. It is something we have been warning of for some time and should be seen in the context of what happened last year. In 2017 we experienced the lowest levels of volatility in a generation. The correction happening now is therefore not unusual.
“US equity markets in our opinion were overly optimistic and were susceptible to any bad news. The problem is that the US has been doing ‘too well’. The stock-market has been riding high on the back of low unemployment and strong corporate data and confidence. A by-product however is the threat of wage inflation and rising borrowing costs which increases the likelihood of multiple interest rate rises. This is what has spooked investors.
“Despite the correction, the S&P 500 stock market index is only just negative for 2018. In our opinion this weakening in prices will present investment opportunities. We may see more volatility over the next few days. Central banks are moving towards a more normal interest rate policy and some of the distortions of the last few years are unwinding. However the economic cycle is still very much in positive territory and the growth outlook remains optimistic.
“In my opinion this is just a welcome correction because the recent momentum was unsustainable. Investing is rarely plain sailing! For those with a longer-term view such periods offer an opportunity to invest. We don’t see this activity as an indication of a looming bear market. It’s important to keep a cool head.
“The UK also has low unemployment and some wage inflation but I don’t think anyone feels as though our economy is overheating. The economic picture is mixed, particularly with the uncertainty of Brexit. In the UK we are expecting interest rates to rise but unlike the US this will be on a slow, gradual basis.”
Blue Sky Financial Planning, established by Gary Neild in 2002, provides comprehensive financial planning to individuals who wish to prepare properly for their financial future. The company’s vision is to help clients understand their choices fully and empower them to live the lives they want with peace of mind.
Services include tax planning, the co-ordination of pensions and investments, and retirement forecasting. Blue Sky Financial Planning is authorised and regulated by the Financial Conduct Authority and is entered on the FCA register (www.fca.gov.uk/register) under reference number 211720. For more information, visit www.blueskyfp.co.uk.