Investment Markets Tumble and Equity markets have continued their downwards slide this morning , with investor confidence rattled by further concerns over the Chinese stock market . It seems a though the Chinese economy is entering a deflationary period (after many years of stellar growth).
The Chinese government’s response in depreciating the Yuan is to effectively export their deflation around the globe.
Many commentators have stated that investors should not panic and that the market will settle down – I am not so sure – neither are others – and that is why the global financial markets are getting whacked.
In the USA, the Dow ended Friday down at 16,450, a huge 1,018 points for the week, it is now lower by 300 points than in 2008. This means that the US market is now in a correction.
It is not simply a problem with the Chinese stock market however as the Chinese governments’ triple depreciation of the Yuan will lead to a domino effect on global currencies and markets.
However there are other reasons why investors are selling off investments, there is a prevailing view that valuations were a little stretched anyway and there is considerable unease at the long term effect of lower oil prices.
Yes it is likely that markets will settle down in a month or two, but the current sell off of investments could simply be a preamble into a much bigger loss of confidence later on AND a much bigger drop of global markets.
Should you be worried, if you are a typical investor and have far too high a percentage of your portfolio invested into UK blue chips then yes, you probably should be worried? Check that your portfolio has the right mix of assets that suit your investment personality.
Remember that true investing is about income, so skew your portfolio towards high yielding investments.
We have already taken action for our clients and have been advising them to move out of traditional stock market investments into Real Estate Investment Trusts.
We are also looking at Absolute Return Funds as we believe that skills in trading currencies will be helpful with current market conditions.
Take professional advice, however if that advice is simply sit tight and do nothing, start to worry!