Quarterly GDP figures from the UK and the US both disappointed as expectations were higher.
Also, after the Federal Reserve met and kept rates the same, markets began looking towards a rise in December after comments from the board hinted of this. The US equity markets rose on the day of this news, only for expectations of a hike to recede the day after following reports of a disappointing 1.5 per cent rise in US GDP during the third quarter.
It could have been a period marked by looser and longer monetary policy from the world’s major economies, but at the end of the week Japan backed its growth data and decided to keep its own quantitative easing programme on hold. The taps remained closed in the Pacific for now.
It’s about whether advisers should pick clients’ funds based on market noise, or an unclouded fundamental belief this is the right investment at the right time Taha LokhandwalaWhat this reminds us, whether as a writer or an investor, is to keep in mind fundamental data. Playing markets against each other during quick-fire reactions and volatility is a strategy unto itself, and requires skill and conviction. For those lacking either, fundamental data remains the best option.
This is what advisers should look for from their managers. Those who outperform indices or peer averages do so, not because of luck in one or two holdings, but because they have a better understanding of what makes markets work in the long term. And further to this, they do not react to short-term market movements based on rhetoric and fruitless expectations.
This thinking does not necessarily play into any age-old active vs passive debate, but relates more to managers and funds themselves. It’s about whether advisers should pick clients’ funds based on market noise, or an unclouded fundamental belief this is the right investment at the right time. When things go wrong, many investors have a habit of blaming other investors for market movements, claiming not to be part of the very system they suggest is moving independently from their control. That is never a good sign, and shows a lack of belief in what they are doing.
Institutions like central banks and large companies will always have an effect on how markets operate and perform. However, bar a few upsetting corporate moments, these organisations rarely surprise clued-up investors. It’s important to see through market noise when selecting asset classes, and not just fall back on blaming underperformance on everyone else.
Taha Lokhandwala is news editor at Investment Adviser