News
Market Overview 2009
15/12/2009
With the economic turmoil and much publicised financial meltdown experienced throughout 2007 and 2008, many investors would have been forgiven for keeping their hard earned money under their mattress in 2009. Those who took this approach wouldn’t have lost any sleep worrying about the volatile stock markets we experienced in the first two months of 2009, however, they would have failed to participate in the spectacular growth experienced in the next 10 months.
The FTSE 100TM* fell by 31%** throughout 2008 and then fell another 16%** in only the first two months of 2009. However, what we have seen since February is quite remarkable. The FTSE 100TM* index increased by more than 53%** between March and November 2009, this is the steepest ever rise in its 25 year history. Did you see this coming? The chances are probably not! Nobody, not even the best Professional Fund Managers, have worked out a successful method to accurately and consistently predict when the FTSE will rise and fall.
So is this a good time to be invested in the markets? Well, in the absence of a crystal ball, past performance and the experts’ opinions is all we have to go on. Clearly, one factor to consider is that with interest rates being at historically low levels the alternative of leaving your money on deposit isn’t so appealing. In addition, many experts also believe that even after the March to November rally there could still be good value in the stock market. This is primarily because many firms implemented swingeing cost cutting exercises during the worst part of the recession and as a result the ones that survive should come through much stronger. Whilst a repetition of the March to November rally shouldn’t be expected in the near future, with the first green shoots of recovery appearing many believe that the markets will continue to climb throughout 2010. As always though, there will undoubtedly be some falls along the way, although it should be appreciated that this is not necessarily a bad thing.
At times like these good fund managers can take advantage of market opportunities that others do not see. As a result, over time, the difference between good fund managers and poor fund managers becomes more apparent. Also fluctuating markets can expose different skill sets. Some managers are more defensive and produce better relative returns in falling markets but are not so good at picking the right stocks during the market rallies and vice versa. This is part of the reason why SFS believes Fund of Funds is such a strong investment solution. A good Fund of Funds manager can pick and choose the right managers for the prevailing market conditions and can change things around quickly when conditions change.
* A measure of the share performance of the 100 largest companies in the UK.
** Source: Lipper Hindsight
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