Market Update – Volatility, Portfolios and Perspective
It has been an eventful month, so we wanted to provide a brief update on recent developments and what they mean for portfolios.
We are living through a period where events that once shaped an entire year now seem to arrive in quick succession, making perspective and discipline more important than ever.
Portfolio resilience
While the last month has been uncomfortable, our portfolios have held up relatively well. Over this period, our balanced portfolios declined by around 3.5%, compared with a fall of roughly 8% across global equity markets.
This is exactly why we build portfolios using tried and tested diversification frameworks. Periods of market weakness are never pleasant, but they are a normal part of investing, and a well-constructed portfolio is designed to help manage them.
Using volatility to our advantage
Importantly, volatility can also create opportunity. Earlier this week, we increased exposure to global equities, moving developed markets from underweight back toward neutral. With share markets around 10% below recent highs at the time, we believed it was a sensible opportunity to add to growth assets at more attractive prices.
It is also worth remembering that share markets look forward, not backward. They do not wait for headlines to improve before recovering. In fact, some of the best days to invest occur while sentiment still feels most uncertain.
As renowned investor Jeremy Grantham observed “The market does not turn when it sees light at the end of the tunnel. It turns when all looks black, but just a subtle shade less black than the day before.”
This distinction matters as negotiations in the Middle East continue to evolve.
Across US equities, which represents a large share of the global index, earnings expectations rose by 2% in March and are now up 17% over the past year, even as PE valuations fell 15%.
In other words, share prices have weakened more than the underlying fundamentals.
Our focus
Our focus remains on disciplined investing, selective rebalancing and avoiding reactive decisions driven by emotive headlines. We will meet with our Advisory Board in the coming weeks to review the outlook further and will provide another update following those discussions.
As always, if you would like to discuss how current conditions relate to your portfolio, please get in touch. We hope you enjoy the Easter long weekend.
Warm regards,
Mackay Private Wealth
General Advice Warning: Any comments in this communication do not consider your objectives, financial situation or needs. Before acting on any general advice, consider whether it is appropriate for you.