Change is Inevitable

Following the election results, it’s worth remembering that the world is constantly in flux. Nothing ever stays the same and major elections in the UK, Europe, and the US might make you anxious about the impact on the markets. But here’s the key takeaway: CHANGE IS INEVITABLE so it doesn’t have to be a reason to worry about your long-term investments.

I believe that financial markets operate via ‘perfect market theory’. This theory suggests that all available information is already reflected in current market price. In essence, the market is constantly forecasting future events, including political ones.

In reality, I believe that the real game-changers are the things that we don’t see coming. The COVID-19 pandemic, 9/11 and Lehman Brothers collapse are prime examples. These unforeseen circumstances caused ripples throughout the markets but history has shown us that markets tend to recover and continue their upward trajectory in the long run.

Let’s look at some recent political events. From the 6 months before to the 6 months after the UK EU referendum and the election of Donald Trump, the FTSE 100 and S&P 500 grew 26.11% and 31.99% respectively. There may be market jitters but markets continued to grow over the longer term.

Trying to “time the market” by predicting the impact events will have on the market and making investment decisions based on those predictions is notoriously difficult. At Clarity Wealth Limited, we believe it is more important to have time in the market rather than timing the market.

Of course, there are ways to manage your risk during periods of change.  Phased investment plans and strategic withdrawal management can help you weather market storms and as a Financial Adviser, part of my job is to help you with this.

Remember, change is a constant, but through diversification, a long-term perspective and potentially phased investment strategies, you can navigate these changes with confidence and keep your financial goals on track.

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