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‘The troubles of Europe’ - Lee Westley, one of our rising stars, writes about our view of the Eurozone.
Sitting at our desks watching events unfold in the Eurozone, it would appear from the various reports and news bulletins that all hope is lost. The world is over…as it was in 2007, as it was in 2001 and further back in 1992 and the 1920’s.
We sit here wondering what the wider public is making of this and more particularly, our clients. We therefore want to give you our own brief perspective of events and what it means for us all, as investors.
The election of Francois Hollande in France has created a certain amount of uncertainty in markets. Hollande, a socialist, is opposed to the austerity measures that have shaped the economic and political landscape in recent times, and which crucially is a measure favoured by his German counterpart, Angela Merkel. It will be of interest to see how their relationship develops and how they plan to solve the Eurozone’s problems (of which there are many).
Greece in particular is central to much of the Eurozone discussion at present. Their recent elections have failed to create a Government, and voters return to the polls next month, meaning that the uncertain situation is likely to linger for some time to come. It is unknown whether Greece will remain part of the Euro or go it alone, and what implications this may have for the region as a whole.
The common theme of these events is uncertainty. This situation is likely to evolve and unfold further. Uncertainty is what investors and markets dislike the most. This has resulted in downward pressure in equity markets across the globe.
However, despite seemingly approaching Armageddon, our message is…
Not to worry!
As investors, we should expect that volatility is an essential, organic element in a never-ending cycle of investing. As investors, we have endured many similar periods of retraction and each and every time investors have resurfaced stronger to tell the tale. Examples are 2007/8, 2001, 1992 and further back, the 1920s. We will experience periods of retraction again in the future. However, a well diversified portfolio has always bounced back and performed well over the longer term. It is important therefore not to become too fearful when markets are falling, nor too euphoric when markets are rising.
There are many stories of doom and gloom which we read about. There are many good opportunities for investors of which we read less. Take Apple for example; a company that has flourished through innovation against a backdrop of economic woes. This is the type of company that investors are exposed to within well diversified portfolios.
Take solace that you have a portfolio that is well diversified and invested in such a way that matches your risk profile in order to meet your long term financial planning objectives. We remain confident that the funds we have recommended meet our exacting qualitative standards and that the individual manager makes the most of opportunities in the market, whatever the investment climate.
Clearly, some of you will be concerned and fearful and this reaction is normal. If you are concerned, please contact your adviser who will be happy to help.
Lee Westley
Financial Planner
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