By Harvey Jones
The perfect storm that has menaced stock markets in recent weeks appears to have blown itself out, at least for now, without causing lasting damage.
That will come as a relief to investors who battened down the hatches, fearing their wealth would be blown away in the financial equivalent of Hurricane Gonzalo.
Although the FTSE 100 fell 10% from its early September high of 6878, it didn’t crash through the psychologically important 6000 barrier, and is already recouping losses.
There is something almost comforting in the way October pops up to wreak seasonal havoc on stock markets. Let’s hope shares now go on their equally traditional pre-Christmas jolly.
The latest storm has confirmed some very old lessons. Once again, we’ve seen that timing markets is impossible. October jitters aside, it’s hard to say exactly why the sell-off struck when it did.
The eurozone has been a worry all year. As has the Russia/Ukraine stand-off, Islamic state, Chinese slowdown, and trumping all of them, fears of monetary tightening in the US.
It’s equally hard to nail down exactly why the storm faded away. The single currency is still failing, Russia still menacing, China still slowing, and Iraq and Syria still burning. QE3 has faded away altogether.
Some still believe the US and UK will start hiking interest rates shortly. I don’t think they will.
Experienced IFAs who advised clients to sit out the October storm will be feeling vindicated today. It helps if you’ve been through this type of thing several times before, as most advisers have.
Those who encouraged clients to top up their holdings while prices were cheap should be feeling particularly pleased with themselves.
With market volatility likely to continue, they may get another opportunity.
Personally, I love a good correction. And I thoroughly enjoyed this one, topping up several funds as prices plunged.
My major worry is that, once again, the FTSE 100 has retreated just as it looked set to recapture its all-time high, which it hit long, long ago on Millennium Eve.
With the index still lower than it was 15 years ago, advisers face a struggle to reassure clients that stock markets are the route to long-term wealth.
Slowing expectations of global growth will also dent confidence, as fears grow that the five-year bull market has now played itself out.
If you held your client’s hands through recent storms, you will also have to hold them during the long slog to the sunlit uplands of full recovery.
We will get there, but expect plenty more storms along the way.