Money Matters from Chorus Financial answers all your questions on finance, tax, pensions, investments and more here in Spain.
This week we received the following question over falling UK investment values from Robert C in Altea on the Costa Blanca.
Dear Tracy. I’ve only just become a Spanish resident and have kept my UK investment platform running. I’ve had it for over two years now and have noticed a significant drop in its value since the beginning of February. As I’m no longer in touch with my UK adviser, I hoped that you might be able to shed some light on this and give me some reassurance.
Hi Robert. The markets started well in February, and all of the main indexes were strong for the first half of the month.
From mid-February we started to see some large pull backs.
To put that into perspective, the FTSE’s high was 6748 on February 16 and it reached its lowest point of 6483 on February 26, loosing nearly 4%.
The S&P 500 had a similar story, dropping by 8% and the market which had the most significant pull back was the NASDAQ.
This index is made up of nearly 50% technology stocks and has dropped by over 11%.
Most investors who hold technology, medical, financial funds will no doubt have experienced some losses since the middle of February.
The main driving force behind the market volatility was the rise in the US 10 Year Treasury yield, which has increased sharply.
It would take another page or two to fully explain this, but in essence, this movement has led to inflation fears, which have shaken both the bond and equity markets.
It has been interesting to see how concentrated that has been, mainly affecting the technology sector, because typically when there are inflation/interest rate worries, it is often more focused on economically sensitive sectors.
This time, we’re seeing it in the growth area where some stocks are potentially a little bit overvalued and maybe this means they are simply more vulnerable from that standpoint.
I think that the little bit of volatility that we’ve had in stocks is a reminder to take a look at your portfolio’s asset allocation, and check it to see whether you’re in line with your target.
It’s been too easy over many years of strong markets to simply let a portfolio run its course, but it’s always important to seek ongoing, professional advice.
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