Moola Market Commentary - September 2017

Posted by Simon Moore on September 17

Positive Trends For Global Shares So Far This Year

We are in the relatively unusual position where virtually all major country's stock markets are currently in positive territory year to date, with many markets making or close to new 52 week highs. This is better than many years in history.

Plus, the exceptions, the markets that have fallen - Canada, Russia and Israel have all declined under 5% at the time of writing. Therefore, we're currently in a pretty good environment for investors. Most markets are up and even markets in decline haven't fallen much this year.

 

A Better Than Normal Environment

Of course, the markets moving up is something to feel good about. Nonetheless, it comes with the reminder that we believe market declines (usually temporary but often lasting years for certain markets) are also a normal part of investing based on history. So please remember that just because things are positive now does not mean it will be that way forever, some ups and downs along the way in the course of investing are very normal in our view.

 

Diversification

Despite the generally positive global trend, UK stock markets have been flat to negative since around June after a good run early in the year. This really helps make the case for diversified investing. Those holding only UK shares would have seen weaker returns recently, whereas global returns have been more robust.

We certainly can't promise that international diversification will always boost returns, but we do believe that it helps lead to more stable investment outcomes over time because all your eggs aren't in one basket.

 

The Pound

One of the major stories for investors last year was the weak pound, heightened by the currency market's reaction to Brexit. As the pound falls, products and services from overseas become more expensive, whether a holiday abroad or imported products like food or a new television.

So many British companies and consumers are having to react to rising prices (inflation). However, in recent months the pound has bounced back a little. Currencies, especially in developed countries like the UK are often fairly subdued, but the rises and falls in the pound recently have been larger than in recent decades. This is one reason why we use currency hedging for some assets in Moola portfolios. It can help shield portfolios from certain currency movements.

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Written by Simon Moore

He was previously CIO of FutureAdvisor, a US digital advisor. His most recent book Digital Wealth, explains automated investing. He studied economics at Oxford, and completed his MBA at the Kellogg School of Management.

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