Stay calm amid tough economic headwinds

You don’t need us to tell you that investors have had a lot to deal with in the last few years. From a once-in-a-century pandemic to the Ukraine war, along with political upheaval in the US and the UK and soaring inflation across the globe, it’s been a tough period, to say the least.

In the face of such grim headlines and events, it’s perhaps no surprise that you might be feeling jittery and thinking of selling up.

But we all know that markets go up as well and down, and that was particularly apparent last month.

For example, the FTSE-100 index of leading shares rose by four per cent in July to close the month at 7,423, while the pound held up against the dollar. Similarly, Germany’s DAX index went up by five per cent last month, ending at 13,484, and the CAC 40 Index in France gained nine per cent to end at 6,448.

These positives have happened despite the ongoing doom and gloom, and justified concerns about just how high inflation could go in the coming months.

So what does this mean for you as an investor?

Well, it’s a timely reminder that you shouldn’t have a short-term outlook on your investments and panic at the first sight of trouble.

Financial waters can be choppy, and they certainly are right now, but calm seas always lie ahead.

If you step back and take a calm, logical look at the current state of affairs, you will see that it’s far from terminal and that at some point, normal service will be resumed.

After all, you may have invested in long-standing, well-financed and effectively managed companies that will be among the leading lights in their respective industries.

Do you really think it’s likely that all these will go to the wall as a result of the current economic headwinds? In truth, you probably don’t, which means there’s no need to panic and act rashly.

Most investments are a long-term proposition, so impulsive action goes against the basic principles of investing in the markets and what you want to achieve.

If you are concerned about the impact of the tough economic climate on your investments, a better course of action would be to review how they’re set up.

For instance, is your portfolio heavily based around one company or one industry? If that’s the case, you might be strongly affected by specific issues affecting that business or sector.

But if you diversify your investments across more companies and industries, that won’t be the case, so your portfolio might ultimately be more resilient.

As we said at the beginning, markets go up as well and down, so diversifying your portfolio is by no means a risk-free option either. However, it’s a more cautious, prudent and potentially successful approach that could pay off in the long term.

So no matter how grim the headlines might be, don’t panic and stick to your strategy. It will get better!

If you need advice on managing your investments, we’re here to help, so please don’t hesitate to get in touch with any questions you may have.