You may have read in the media or seen in your own portfolio that financial markets have had a bit of a rocky start in 2022. It can be concerning to see the value of your investments, like KiwiSaver, go down but it’s important to remember that changes in the value of your investments are simply a normal part of investing.
So, what’s causing these latest market fluctuations?
The key driver is the expectation of higher interest rates across the USA and Europe as Central Banks move to dampen rising inflation. Alongside this we have the continuing disruption of COVID-19, the rumblings of Russia on the Ukraine border and China looking to ease their economy onto a more sustainable path,” says Brent Hunt, AdviceFirst Head of Wealth Management Advice.
“Given the rise of markets over the past 22 months, since the first COVID-19 outbreak, a market correction does not come as a surprise and it signals markets are working as they should in volatile times. They do not rise in a continuous fashion there are always pauses and corrections. Often volatility coincides with expected economic weakness but this does not appear to be the case currently.
While economies are expected to slow with the Omicron wave growth is expected to rebound later in the year. Company earnings should remain solid and the current volatility reflects the transition from an extraordinarily easy money environment.”
At AdviceFirst we design your investment portfolio, which includes your KiwiSaver savings, around your goals and the market volatility is an expected part of that design. However, as seen with the downturns in 2020, 2018 and 2014 the market adjusts and moves forward over the long term.
“Unless your goals have changed there is probably no need to change your portfolio,” says Brent. “We do not try to time markets rather we ride out the volatility through time in the market. The headlines can be full of doom and gloom and markets can remain turbulent for some time. However, we believe maintaining good investment discipline and staying focused on long-term goals is more important than ever.”
If you do have any concerns about your investment portfolio, or your goals have changed, we can help. To talk with an adviser, call 0800 438 238 or email us at letstalk@advicefirst.co.nz
