Commentary on the ongoing sell-off in equity markets


Commentary on the ongoing sell-off in equity markets

While the trigger and, for that matter, the timing of any sell-off is always difficult to anticipate, it had become clear for some time that this rally had become long in the tooth and was due a breather.

Investors need to put the selloff in context. As at the close of trading on Monday 5th February, the S&P 500 index had lost 7.8% from its January peak. Nevertheless, it has gained almost 18% in price terms over the twelve months to the end of Monday 5th February.

So how bad can the sell-off get?

The important thing to note is that the available evidence suggests that this is simply a correction of excess investor exuberance as opposed to anything more sinister. Investors should remember that economic growth remains robust (albeit the outlook is nothing as rosy as the consensus view suggests), inflation remains relatively muted (despite fears about the risk of sharp increases in wage growth) and corporate balance sheets are healthy.

Before long, once the ‘weak hands’ have been shaken off, the underlying positive trend is likely to resume, hopefully, at a more sustainable pace if we are to avoid a more protracted risk-off event in not-too-distant future.

Abi Oladimeji
Chief Investment Officer

Comments first appeared in:

CNN Money (on 6th February 2018)

Professional Paraplanner (on 6th February 2018)


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