ASK THE EXPERTS

CAZENOVE CAPITAL’S PETER HILLER JOINS US TO ANSWER A QUESTION ABOUT INVESTMENT

INVESTMENT: HAVE I MISSED THE BOAT?

ANSWER: It is often said that stock markets climb a wall of worry. That wall is looking particularly daunting at the moment. The world’s two largest economies, the US and China, are locked in a long-running dispute over trade and technology. Closer to home, the UK is edging towards a potentially disruptive ‘no-deal’ Brexit.

No wonder financial markets are worried. Some investors are so nervous they are willing to lock in a loss to invest in government bond safe havens – such as US Treasuries or German Bunds.

Despite the understandable concern, we don’t think it’s too late to put money to work in a well-diversified portfolio. Our view does not depend on particularly rosy assumptions.

Most importantly, whatever is going on in the wider world, many companies are still growing profits and trading at reasonable valuations. We believe that owning shares in these companies offers a sound prospect of long-term investment success.

In the shorter-term, there is also good reason to expect some of the tensions that have been weighing on stock markets to ease. President Trump has scored political points in some quarters by taking a tough line on China. But we don’t think he wants a full-blown trade war as the US heads into an election. This increases the prospect of a trade deal which allows both sides to claim victory.

Looking back over the past few years, buying equities when other investors have been rushing into the safety of government bonds has worked out well. This may be because markets underestimate the extent to which governments and central banks will step in to support growth. The same could well be true this time round.

Whatever the future may hold, certain investment approaches are better suited to tougher markets. A long-term focus, for example, should translate into a more disciplined approach, increasing the overall chance of consistent success over time. A well-diversified portfolio should also help limit short-term damage inflicted by market falls.

The past month has been a reminder of how important this is. At Cazenove Capital, for example, we currently hold govern

ment bonds and gold in most of our portfolios, both of which have performed strongly recently. This has helped offset a more lacklustre performance from equities.