Investment Markets Update

Investment Markets Update image

If you pay any attention to the media, it will have been hard to avoid a series of stories regarding investment market turmoil. There is no getting away from the fact that global stock markets have had a torrid time over the last six months and start to the New Year (which usually benefits from New Year optimism) has seen the worst start in investment markets for over two decades.

See PDF for general market information: 12.01.16 Markets Charting-Trustnet

At Ethical Futures, our expertise is in financial planning and understanding the ethical dimension to investment, but we also endeavour to apply appropriate asset allocation to your investments which should help to deliver an investment return which is in line with your personal attitude to risk.

As the investment caveat goes; “values can fall, as well as rise”, and the present situation is certainly one of those periods when values are likely to fall somewhat. However, despite some quite bleak pronouncements in the media, it is sensible to put some perspective on your investments and also to consider some of the issues which are impacting upon them.

The key perspective to consider is that your market related investments are intended held for the medium to longer term (5 – 10 years). Now, if you have held long-term investments (for example in a pension) and are now approaching the time when you need to access these monies, then timing is a relevant consideration and there may be an argument for moving some of the funds to lower risk assets such as cash. However for longer term investors, the recommendation remains not to be tempted to sell out at a low value but to hold funds for the longer term so that you can benefit from bounces and recovery in the markets in the future.

Some of the key issues which are impacting upon markets can be summarised in the following bullet points: –

  • Markets are cyclical and what goes up will generally come down at some point.
  • If markets are cyclical, then there is likely to be a recovery along the way.
  • Most of the commentary relates to falls in share prices. In general, Ethical Futures arrange highly diversified portfolios for clients and therefore you are unlikely to be fully exposed to just stock markets or shares, especially the more volatile in the Far East in developing countries.
  • In general, most of our clients will only have a maximum exposure of between 40 to 60% of their portfolio to equity funds. The rest of assets being invested in fixed interest, property, cash and other alternative investments – all of which tend to have lower volatility characteristics.
  • Post the 2008 crash, market started to recover around about 2010 and have generally had an upward rise in value over that time. Long-term investors have therefore benefited from this increase in value.
  • Due to the poor return on deposit-based funds as well as fixed interest investments, there has been a tendency for money to flow into equities, potentially overheating and leading to the rise of the market we have seen.
  • In economies such as China, the market has been driven by inexperienced amateur and ‘day trader’ investors (most Western-based investment funds do not invest directly into the Chinese market) and it is their inexperience and highly reactive behaviour which has caused some jitters in the market.
  • This has been further impacted upon by Chinese government seeking to influence the management of the market, which in turn has led to a lack of confidence.
  • Markets are all about confidence and tend to over or under react. At present, we see rapid selling but we are likely to see active buying in the future.
  • Besides China, much of the impact on global stock markets has been in relation to traditional assets such as oil, gas and mining. These sectors which are significantly underrepresented in ethical portfolios.

Does having an ethical portfolio make any difference?

Of course, we would like to think so. However, in general terms if the market falls, then all assets will fall with it, likewise when markets rise ethical funds will perform better as well. However, I am pleased to say that there are certain characteristics of the current market which do protect ethical investors a bit more.

Ethical investment funds tend not to be involved in the activity of daily trading. This means they are not trying to make short-term profit, rather they tend to invest in companies the periods of three years or longer because they see real value in the business, both from a financial and an ethical perspective. This may mean that in the short term investment values are impacted because they retain investment in companies who share price is falling in value, but it also means that they will benefit from any rally in price and are not taking short-term market risks or incurring additional trading costs.

As previously mentioned; part of the problem stems from exposure to Chinese and Far East investment. Whilst ethical funds do seek this sort of exposure, some of the concerns around business practices have limited this and perhaps reduced the risk in comparison to many mainstream funds. In addition to this, the falling oil price and knock-on impacts to mining companies have also impacted upon global share prices and again these sectors which ethical funds are not heavily exposed to, if at all.

In comparison, there continues to be a growing demand for many of the areas which ethical funds placed great emphasis on. These include development of health and education services, transport, energy efficiency and waste management as well as, of course renewable.


We are by no means complacent, but do not feel that there is real cause for concern, although we feel it is fair to flag up to clients that 2016 is likely to be a fairly rocky investment year. Markets can be led by short term sentiment and there’s a myriad of conflicting data from a number of different sources, which means we’re likely to continue to face high levels of volatility as sentiment swings in reaction to the latest economic data and news stories.

The broader environment however is likely to remain relatively benign, i.e. a slow and gradual recovery brought on by gradually increasing consumer spending on the back of increasing wages, low unemployment and continued low energy prices.  However, we are satisfied that both the use of discretionary and multi-asset funds that we adopt within Ethical Futures, together with the detailed economic analysis provided by our chosen investment partners, means that you will have well diversified investment funds which should at least deliver an investment experience in line with your stated attitude to risk.

Should you wish to discuss your personal circumstances, please get in touch with your adviser directly.

Disclaimer: this cannot be regarded as financial advice and you must consult a certified IFA to find out about your own personal circumstances.

The value of investments, and the income from them, can go down as well as up and you may get back less than the amount invested. Any past performance figures are not necessarily a guide to future performance.

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