Sharemarket volatility is here to stay in 2022
Volatility in markets is being driven by Russia's invasion of Ukraine, rising inflation and the prospect of a sharp slowdown in global growth. Although only 3% of global GDP, Russia has now largely been shut out of the global economy. Most Western nations and companies are neither buying from nor selling to Russia.
From their bull market highs last year or earlier this year, the US share market is down 9%, and Europe is down 15%. Australia has held up better due to surging commodity prices to be down around 7%. Surging commodity prices have also pushed the Australian dollar higher.The war in Ukraine remains the key factor driving markets with much uncertainty about how it unfolds and the possible economic impact. Some economists are now speculating that Central Banks will see slowing growth as a reason to reduce the pace of tightening. The Federal Reserve is now signaling that it will raise rates by 0.25% rather than 0.5% at its March 16 meeting.
In Australia, the rising energy and food prices will add to inflation. Flooding in Queensland and NSW is a new source of uncertainty too. The floods are likely to also add to inflation, bringing forward the Reserve Bank's decision to raise domestic interest rates.
There are ways to construct personal or superannuation investment portfolios to mitigate the risks. The first is to have a diversified portfolio that includes assets with low correlation levels. The second is to ensure that your portfolio is actively managed. The third is to regularly track the progress towards your goals.
WLM's investment philosophy has always been to first not lose clients' money – actively seek ways to reduce portfolio volatility. Reducing portfolio volatility is a vital part of growth over time. Diversification and an active asset management approach to investing can mitigate or moderate the typical risks within falling markets.
WLM can help
Don’t have a plan? WLM is here to help you to secure your financial future. If you’d like help with setting your financial goals or any further information, please contact us today.
The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.
