Charles Stanley Wealth Managers Examines Investing in Times of Rapidly Rising Inflation

Rebecca Stein, Investment Manager, Charles Stanley Wealth Managers, explains that as active investment managers, we need to consider many global events that can cause market volatility.

There is no crystal ball that can reliably predict stock market performance. Markets can go up and down based on unexpected events such as natural disasters, terrorism and war. There are also market-moving events that we know will happen, such as the US election and the Brexit vote where stock markets adjust according to the outcome.

These are all issues that we continuously monitor and analyze before modifying the portfolios accordingly.

The current cause of stock market volatility is rising inflation. Many developed countries have an inflation target of 2%, which is considered an acceptable level of price increases. If inflation stays above the 2% target for too long, it can spook markets and cause volatility in equity markets, which is what we’re seeing right now.

The Consumer Price Index (CPI) is the official measure of inflation in the UK. The measured basket of goods includes the cost of household services such as electricity, transport, recreation and food. The CPI index increased by 8.8% in the 12 months ending in July 2022.

Getting inflation under control is the top political priority and central banks now have the task of trying to get inflation under control by raising interest rates, without killing too much growth and plunging the economy into a prolonged recession. .

Central bank actions will likely be the main determinant of market performance for the remainder of this year. Any sign that inflation has peaked, meaning central banks can slow the rate of interest rate hikes, could be welcomed by the market. We are constantly monitoring the development of the situation and adapting the portfolios accordingly.

Today, there is a lot of uncertainty. When the markets are this volatile it can make investing tricky but its important to remember that we are not short term traders looking to make a quick profit we are long term investors and sometimes have those market shakeout is a great opportunity for us to acquire good quality stocks at a cheap valuation.

In times of rapidly rising inflation, beware of holding too much cash as purchasing power is eroded by inflation. For example, if you kept £100 under the mattress in 1980, that £100 is only worth about £17 in today’s money*. (*The source: https://www.in2013dollars.com/uk/inflation/1980)

Before deciding to invest in the stock market, we carry out an extensive risk profiling exercise to determine if you have the appropriate risk capacity to withstand the ups and downs of the stock market.

The most important factor when managing risk is that portfolios should not be biased or too biased towards anticipating a particular outcome. They must be well diversified to withstand all economic conditions, even those that you do not anticipate.

If you would like to discuss any of the topics in this article or to find out how Charles Stanley can manage an investment portfolio on your behalf, please contact a member of the Oxford team at [email protected] uk or call 01865 987 485

Connect with us:

LinkedIn: @Charles Stanley & Co. Limited

Twitter: @_CharlesStanley

Facebook: @CharlesStanleyWealthManagers

CS_WM Logo_Pos Color_RGB aw_100mm

The value of investments, and any income from them, can go down as well as up. Investors may get back less than their initial investment. Charles Stanley & Co. Limited is authorized and regulated by the Financial Conduct Authority.

Dolores W. Simon