Episode 7: What inflation? and All Weather Portfolio’s - The Expat Investor with Tom Pewtress
We look at key market movements over the last few weeks.
On today’s episode of The Expat Investor Podcast, Head of Global Partners at Skybound Wealth, Tom Pewtress takes a look at some of the key market movements over the last few weeks and what our Investment Team has been doing behind the scenes this year.
Last week saw significant movements within the markets, particularly in the US. This was due to the latest round of inflation data that was released last Thursday.
Just one month ago, inflation results saw the year-on-year figure rise to 8.2% which instilled a bit of panic within the markets. It had indicated that the recent interest rate hikes were not doing enough to curb inflation and the Fed had to continue with their hawkish outlook despite many analysts citing we could be close to a pivot.
On Thursday the results of Octobers inflation were published, with many forecasts predicting 8% YoY. However, there were still doubts within the predictions with some speculating a MoM forecast at 0.6%which is considerably higher than the 0.4% MoM results for last month. The forecast of 0.6% took into account many different factors that would affect the MoM, but especially took into account the significant increase in fuel prices in the US over the last month. Despite all of these predictions, we ended up with a YoY of 7.7% and a MoM result of 0.4%, both drastically below the forecast. Could this perhaps be a sign that the continued efforts in increasing interest rates to drive down inflation, may finally be working?
The markets also performed very positively to this news, with the S&P increasing to a 1-day return of 5.5% whilst the tech filled NASDAQ 100 posted a whopping 7.4% 1-day result. It wasn’t just the US markets that reacted positively to the news, other markets such as the FTSE 100 and the Euro Stoxx also did well. This could be a great opportunity for investors as confidence has been injected back into the markets during this market cycle.
A recent study by Fidelity showed the impact of not remaining invested during a market cycle, they found that if you had stayed invested during the period of between the 31st of December 2006 and the 31st of December 2021, you would have received an annualised return of 10.66%. However, had you missed out on just the 10 best days during this time frame (no doubt similar to the market cycle from last week) then you would have seen a return that had been reduced to 5.05%.
The moral of the story is that if you are investing for the future, you are bound to be far more successful by allowing yourself to ride the rollercoaster rather than trying to time the market. This ties in nicely with episode 5 of the podcast from a few weeks ago when Tom discussed the importance of a financial plan and how having a plan in place will significantly increase your likelihood of a positive outcome. A plan will enable you to experience these market spikes and downfalls but at the same time giving you the confidence to not freak out and panic buy or sell.