Investment Newsletter November 2017
It’s quiet. Too quiet...? We have recently highlighted just how calm stock markets have been this year. The FTSE 100 index ended 2016 at 7,142. By May it had hit a new record high of 7,547 but over the next six months it pretty much went sideways, peaking at 7,562 on 6 November.
Mike Deverell Investment Manager
Since then volatility has picked up somewhat with the market dropping to 7,380 as of close on 17 November. In comparison with recent movements, this drop of around 2.4% over a couple of weeks feels relatively dramatic but in actual fact it’s more like what we would expect to see regularly in a more “normal” year! Chart one shows the calendar year returns of the FTSE All-Share going back to 1986. The red dot for each year shows the largest intra-year decline during that 12 month period.
As we’ve highlighted before, more often than not markets see a drop of at least 10% at some point during the year, regardless of whether the market ends that year up or down. The last time we didn’t see a double digit sell off was in 2005. The biggest peak to trough movement this year has been 4%. If this was still the case at the end of 2017 it would be the smallest intra-year decline since 1995. This of course highlights what we always tell clients; that past performance is not a guide to future performance! You cannot rely on historic statistics and assume the future will be the same as the past. Having said that, we do think historic data can provide some insight into market behaviour. Chart 1 tells us that it is very unusual to see such low volatility, but it is not without precedent. Likewise, stock market
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