Page 30 - DIY Investor Magazine | Issue 41

MARKET VOLATILITY COULD ENCOURAGE A SHIFT BACK INTO BONDS
· August 2024 30
DIY Investor Magazine
Commenting on the global stock sell off and market out- look, Chris Metcalfe says:
“The statistics we’re seeing right now are truly remarkable. Japan has experienced its worst day since 1987, marking a historical low, we’ve also witnessed the worst three-day run ever, and South Korea has just had its worst trading day
on record.
Interestingly, despite the turmoil across Asia,
China appears to be losing less ground compared to its neighbours, at least for the moment. Futures markets are also painting a grim picture, although it’s noteworthy that value stocks seem to be faring better than growth stocks.
‘THE STATISTICS
The sentiment hasn’t been WE’RE SEEING RIGHT
helped by Warren Buffett’s NOW ARE TRULY
decision to dump 50% of his REMARKABLE’
Apple holdings, which has certainly contributed to the current market anxiety.
Gold is holding up as something of a safe haven, but historically, in times of crisis, investors end up selling what they can rather than what they want to, which might eventually affect gold as well.”
ON CURRENT MARKET DRIVERS:
On current market drivers: “Several factors are contributing to the current market upheaval. While we received disappointing jobs data from the US on Friday,
it wasn’t catastrophic.
However, the Japanese central ‘SOME STOCK bank’s decision to raise rates seems VALUATIONS HAVE particularly poorly timed, especially
REACHED since the Federal Reserve
UNREASONABLE LEVELS’ might need to cut rates faster
than anticipated.
Earnings reports have been mixed, with tech companies delivering slightly disappointing results. Moreover, some stock valuations have reached unreasonable levels, and we’re now seeing an unwinding of leveraged trades, which is exacerbating the market movements.”
ON HIS OUTLOOK FOR FIXED INCOME:
“There has been considerable debate among advisers and commentators about whether to move away from bonds in favour of equities and cash.
Even before the recent selloff in the US and the dramatic collapses in Japan and other parts of Asia, data suggested that higher-yielding assets were undervalued compared
to equities.
‘THEY ARE CURRENTLY ACTING If market volatility continues,
AS A SAFE HAVEN’ we might see a shift back into
bonds, as they are currently acting as a safe haven.
This trend is likely to persist if equities remain unstable, providing a more secure option for investors during
these turbulent times.”
Chris Metcalfe is IBOSS Chief Investment Officer, part of Kingswood Group
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