Managing in a sea of uncertainty
- To understand how asset correlations are operating in the current climate
- To look at alternative ways of diversifying
- To understand how markets are responding to current trends
Managing in a sea of uncertainty
- To understand how asset correlations are operating in the current climate
- To look at alternative ways of diversifying
- To understand how markets are responding to current trends
Introduction
By Melanie Tringham
The talk every day in the markets and on the world stage is how uncertain and risky the world has become.
With the advent of Donald Trump in the White House, the world has to contend with a non-politician running the largest economy in the world, an economy that has influence over at least the rest of the West, if not everyone else.
Early promises of tax cuts and infrastructure spending boosted the stock markets in the early weeks of his presidency, but scepticism is starting to seep in as other policies promoted on the campaign trail have run into resistance.
Meanwhile, uncertainty mounts over Europe: political risk over the UK economy mounts as it is unclear what kind of trading arrangements the UK will have with the rest of the world, while trends in the French elections threaten the viability of the EU itself.
Amid all this political risk sit investors, some of whom have been through financial crises before, but clearly may be feeling nervous about investment trends.
What will protectionist policies from the US mean for global trade, and the ability of companies that provide investments to make a profit?
Traditionally, the best path for protecting one's investment portfolio from economic shocks was to diversify, but conventional assets - bonds and equities - are not behaving according to the 'fundamentals' due to government intervention through quantitative easing.
This does not mean these assets are not worth investing in, but advisers are being forced to think more imaginatively about how to diversify their clients' portfolio. They will also need to think how far they can move their clients up the risk scale and what they are trying to achieve.
Above all, this is the time when an adviser shows how his or her expertise really comes into play, and how rational thinking and experience can help protect clients against the worst outcomes.
It is only by keeping a steady hand on the tiller and sticking to investment fundamentals that investors can ensure they will weather the worst storms in the months and years to come
Melanie Tringham is features editor of Financial Adviser
