A plummeting pound, volatile bond and stock markets, a superpower trade war, a looming global recession, and political turmoil over Brexit - it's only human to be rattled in the face of all that. When markets turn rough, conventional advice to savers with cash invested for the long term is always to ensure you are well diversified, and avoid knee-jerk reactions. But even if investing is a long game, and it's unwise to cash out because markets have temporarily gone wild, there are some steps you might consider taking.
Reviewing where you are invested and whether to do some rebalancing isn't an over-reaction. Should you reduce your UK equity exposure and look to the US or Japan, or switch to lower-risk assets like bonds, or simply cash? And what about gold, which generally does well in times of global slowdown and uncertainty? Here's a quick summary:
- Yields on bonds are very low and are sensitive to changes in economic outlook - so if the global outlook picks up bond prices may fall. Holding UK government bonds might not protect investors if a no-deal Brexit leads to a loss of confidence in the British economy and leadership.
- Cutting exposure to UK assets is one option. Emerging markets may have better long-term growth potential and their governments often have less debt than their Western equivalents.
- Stick with the UK: Pound is weak so buying abroad is expensive. Those investing in US and global equity funds could be making a 'grave mistake' by taking their depressed pounds and ploughing them into much more expensive US shares.
- While gold is perceived as a safe haven in times of uncertainty, this 'doesn't mean you can't lose money.
About the Author: Glen Callow
