Five reasons to be positive about market falls

6 February 2018

For anyone who might be alarmed by today’s stock market news, here are my five tips to help you stay positive. 

It can be difficult not to panic when you see headlines of market falls, but keep in mind that this correction is not unexpected. Many investment managers, including my firm, European Wealth, warned that it was coming; a case of ‘when’ not ‘if’.

These warnings do not alter events and if you are concerned that is understandable, voices have long been questioning how long this 'bull market' of positive returns can continue and these falls may suggest that a 'bear market' and more falls are coming.

However, we don’t think so.  We recommend that investors keep their heads and consider the following:

  1. We believe that this is a correction not the start of a bear market. We are not alone in this belief and the reason we are confident in our belief is that the global economy remains solid.
  2. There is a buying opportunity opening up: most equities are now cheaper than they were last week – although they may still get cheaper.
  3. But, don’t wait for signs that we have hit the ‘bottom’ of the market – “Bottom fishing” is for fools – guessing when the markets have hit their lows will be just that, guessing.
  4. Bad days make good entry points: it is worth reviewing your portfolios with your investment manager or financial adviser if you have one. Consider looking to add to your equity allocations. At European Wealth we will be doing this for our clients and we favour Japan, the Far East and Emerging Markets in particular.  
  5. And don’t forget that you have annual tax allowances from the Government and the end of the tax year is coming soon. Losses may prove valuable for your capital gains tax allocation.

Richard Stammers is investment strategist at financial planning and wealth managment firm European Wealth.