By Wael Al-Nahedh, CEO at Spearvest
The global economy has been experiencing unprecedented uncertainty in recent years. Political, economic and social challenges have meant that businesses and individuals are incredibly cautious about where they place their money, particularly for long-term investments.
The overall concerns in the US market topped with the UK’s difficult political situation around its planned departure from the European Union is making investors sit tight and hold back on plans until the future is clearer. With market uncertainty, it is crucial that investors realise it can bring with it great opportunities that only those who are forward thinking will be able to capitalise upon and improve their returns.
The US is a very complicated market for investors. For a fourth straight quarter, CEOs say they are less optimistic about the market which is highlighting a broader trend of concern around corporations at their peak time of profitability. As well as this, the inverted yield curve is producing warning signs of a recession and recent data shows a clear weakness from housing and retail sales and customer sentiment.
The UK market is producing quite negative predictions for business investment. A recent poll from the British Chambers of Commerce has predicted that UK business investment is set to decline in 2019 by 1 per cent – making it the worst year since the financial crash of 2008. Economic growth reports have also predicted that 2019 will be at 1.2 per cent, the lowest in a decade. This is a concerning position for the UK to be in and its certainly clear that the estimations are corresponding together with the uncertainty around Brexit. However, we must make it clear that these are only forecasts for now and they are likely to change, either negatively or positively to reflect the developments. Once the final outcome of Britain leaving the European Union is made, the market should steady itself and these predictions may be updated.
Interestingly, China’s growth has set to be lower this year too due to trade tensions. It is also set to have slower growth in consumer spending and a tighter hold on global liquidity. Despite this prediction, China’s government are attempting to stimulate the economy through fiscal, monetary and regulatory measures to help growth levels match targets.
Thanks to the challenging markets, it has never been more vital for an investor to monitor their current portfolio and look at where investment is needed. For businesses, they must insist on having a clear view of the market before committing to long-term and costly investments. Despite the need for clarity, it should be noted that with uncertainty, brings fantastic opportunity for investors to get ahead when many are being overly cautious. There is often an opportunity to strike a better deal, provided it is the right investment for the individual or business that will give long-term success.
Although volatile markets can be incredibly successful for some, one must be able to withstand the rapid change in market values and the associated possibility of loss. This means advice given to investors is extremely important to get right, particularly on the topic of what they should be holding onto throughout a dip in the market versus what should be simply let go of.
To stay ahead of the curve, investors should look at diversifying their wealth on a global scale and turn their heads towards value-focussed funds which is ultimately investing in unpopular stocks that have seen some significant growth in the past but not as popular as the higher growing stocks.
It is apparent that economic uncertainty, driven by current political circumstances in the US and UK, is a real concern for investors. When political uncertainty is prominent, we often see emerging markets profit from the situation and I think this is what we will end up seeing here. Investors should look at markets that would not usually have their attention and look at potential commodities that have previously taken a backseat.
To have a better view of how a portfolio is performing, technology can be implemented. It is becoming increasingly important for each custodian of wealth to be digitally connected, and to feed live data into a secure platform. This helps to provide investors with a full view of their whole portfolio in real-time – an important insight for uncertain markets. This type of technology will rely on independent market pricing and the reporting process must be objective and accurate in order to give the necessary and correct data. By having this, an investor can properly assess their portfolio performance and make smarter and better-informed decisions. Although, it’s not all about performance. Obtaining a fully consolidated view of wealth means it is easier to mitigate risk, allowing an investor to recognise potential issues and take action before they become a bigger problem.
Whilst political uncertainty remains a concern for all investors, it should not equate to an end of an investment portfolio. When looking to invest in difficult times, it is important that those looking to distribute their wealth are given advice that is well-informed, unbiased and profound from those who are closely watching the markets and can provide strategic and tactical guidance. As we see more individuals shying away from making investments, this is when fantastic opportunities open up for those looking to take more of a risk for a higher return down the line.