Global stock-markets have been volatile again on fears over escalating trade tensions, but it’s not all bad news for business and investors in the UK and Europe.
The volatility was most marked at the end of last week following US President Donald Trump’s announcement that tariffs of $60bn would be imposed on Chinese imports causing a sell-off in investment markets. It’s no surprise that Asian markets witnessed the most significant falls, the Eurozone and UK equities escaped the worst of the selling. On Monday the Dow Jones rose by 2.84% (its third largest gain in history) as these trade war fears eased.
It’s important to note that negativity in the media can be the enemy to financial growth. As your advisers we are never crisis-led and never make decisions by reacting to news. Our role is to use our decades of expertise and knowledge to suggest robust, long-term financial plans – predicting market swings and timing markets rarely brings success.
Why did markets fall?
After the US President announced his plans to impose tariffs, China retaliated by revealing plans to apply tariffs on 128 US products.
Investors fear the impact of escalating trade tensions on global economic growth and corporate earnings. The latest bout of volatility follows the market weakness in February amid fears around the pace of interest rate rises by the Federal Reserve in response to growing inflationary pressures in the US economy.
The prospect of a trade war-driven slowdown follows a period of rising optimism around the outlook for the world. In January the International Monetary Fund upgraded its global growth forecasts for 2018 and 2019 by 0.2 percentage points to 3.9%.
What are the upsides for Europe?
Despite the perceived doom and gloom, there are upside for the UK and Eurozone economies. Many countries around the world are now looking to the UK and Europe for trade partnerships.
President Trump’s stance has had the effect of making the dollar less attractive for central banks and the billions of dollars and it is not unreasonable to think the same lean towards Europe is going to be happening in the area of capital markets and reserve allocations.
What action should I take?
If you are a long term investor, have regular savings into stock-markets or have been waiting for an opportunity to add funds to your investments, this temporary downturn and volatility represents an opportunity. Discipline and patience in times of low asset prices may lead to better returns in the long term. This is an opportunity to buy in a sale and who doesn’t love a sale…?
This is intended as information only and does not constitute investment advice which should take into account all of your circumstances, aims and objectives together with your attitude to investment risk. If you would like advice and to arrange a meeting with a Robertson Baxter, call 01484 608095 or visit: www.robertsonbaxter.comÂ