We detail below our views of the depressed stock market over the last two years or so. At the turn of the century, the millennium, which was less than two years ago, FTSE was hovering around the 7,000 mark. Since then not just the UK but many World markets have fallen substantially. Technology, Telecoms, The Nasdaq, FTSE, Europe, they have all suffered. At one point last year FTSE went below the 5,000 mark giving many investors who invested at the high point losses in the region of 30%.
So who is right? When is the right time to invest and when is not? If anyone knew that answer they would be multi-billionaires and lying on a beach somewhere. There is no right of wrong time to be invested in a particular market. Many people are fishing for the bottom of the market to buy in at the lowest point but when is that? We cannot give all the answers but will give our view on perhaps some of the causes and whether now is a good time to invest.
Our view
Is that whilst the sad events in the United States did impact on markets, and may continue to do so, the economic factors for growth in World stock markets are still there but you should still expect a volatile market. The general cause of decline over the last two years or so has predominantly been to do with the cost of oil. Last year, a barrel of crude cost in around $30-$35 a barrel. In simple terms, oil prices had been pushed higher and higher by Oil producing nations, which in turn impacts on all sectors of World economies. Higher oil prices cut profits and, therefore, the demand for a company's shares. Oil prices are now hovering in the lower $20's per barrel. Which is very favourable and below that which OPEC want as standard. They have, however, agreed to this for the time being to aid economies.
On top of this, we have seen seven interest rate cuts in the United States alone since January to stimulate the economy as well as interest rate cuts here in the UK and moves across Europe and Pacific to stimulate economies there. Voices are heard giving positive messages of growth from both the Federal Reserve, The Bank of England, The European Central Bank and the International Monetary Fund (IMF). So they would appear to be positive. The thing to remember is that the moves above to stimulate economic growth take anything between twelve months and two years to be reflected in the ecomomy. It will be sometime yet before we start to see company profits rising.
The question is about timing. Big institutional investors such as banks and insurance companies always try to anticipate the market and second guess by buying early. Many appear to be taking a stance that markets will move positively and changing their outlook for both the UK and World Stock markets.
Take a look at the summary of what they think. Should you change your views? We believe for a medium term investment, perhaps now is as good a time as any to invest.
If you are still concerned about entering a stockmarket type investment, there are a number of new products that have been launched with capital protection and these may be for you. Contact us if you would like to know more.
The views above are those of Ashley Clark, Director at . No advice is given or deemed to be given. Please contact us if you need advice.