The main world stock markets have had a mixed week with the US market dominating the headlines.
For some time now the US stock market has been leading the way in terms of increases since the Covid crash.
This rise has been mainly driven by the major US tech companies. But over the last week or so we have seen a slight correction as investors get nervous of their high valuations.
As for some examples, Apple was down 15% and Tesla was down 33%. There has since been a bit of a recovery.
This serves to remind us that valuations are important. There will always be a point where a company looks overvalued and it could be seen as a bubble that’s about to burst. The problem is you just don’t know when that bubble will burst!
After things appeared to have settled down over the last month or two as the world economy starts to recover from a Coronavirus lockdown, volatility has definitely returned to the markets.
There are worries over rising Coronavirus cases and we now enter the US election season which will always cause some volatility as the markets try to predict the outcome and what it means for business going forward.
Our RTS Investment Strategy has already reduced exposure to US stocks in favour of European and UK stocks as these appear better value.
The UK does have its own problems though and we were reminded this week about Brexit. There was a lot of talk about the struggles of trying to get a deal and an announcement in the commons that UK may ‘slightly’ break international law by changing the Withdrawal Agreement.
The UK stock market has certainly been pricing in the uncertainty of no deal as the UK stock market performance has been behind the US and Europe for some time. If there is no deal it’s likely the pound will fall but this doesn’t mean UK stocks will fall. A cheaper pound can mean more foreign investment plus as most of the UK’s biggest stock market companies are international companies with profits from abroad, when they bring these profits back into pounds they get more for their buck.
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Stock market linked investments and any income from them, can fall as well as rise and is not guaranteed. Any figures quoted are for illustrative purposes and should not be taken as a forecast or guarantee. Past performance should not be seen as an indication of future returns and clients may get back less than they have invested.