Balanced portfolios key to combating global economic winds

It seems that every way we look at the moment, uncertainty reigns.

At home, we have the uncertainty caused by rising energy costs, the latest rise in interest rates (now 0.5% following last week’s Bank of England decision) and the corresponding concerns over people’s cost of living.

Then, there is the continuing saga surrounding Prime Minister Boris Johnson and whether his latest survival strategy will be sufficient to enable him to keep the keys to 10 Downing Street.

Further afield, Russia continues to mass its troops on the border with Ukraine with the world watching closely to see if President Putin will decide to strike and how the western world will react if he does so.

Given so much uncertainty, clients often ask me why the FTSE 100 remains so resilient. The simple answer is that while the FTSE often grabs the headlines, it can mask the wider global economic picture. The reality is that the FTSE 100 is dominated by the ten or so biggest companies which represent around half of the index including the likes of BP, Unilever, Royal Dutch Shell and HSBC.

While we obviously keep a close eye on the FTSE 100, our focus is much more on the broader global financial markets which are significantly more balanced in terms of the stocks represented.

And while we, like the rest of the nation, monitor with interest what is happening in Westminster, whether Boris remains as PM or he is succeeded by someone else will have very little impact on the markets or our clients’ portfolios.

This contrasts with what is currently going on between Russia and Ukraine which, should the situation escalate, will have ramifications for the wider economy not least with energy supplies likely to be one of the dominant issues.

It is our job as Chartered Financial Planners to work closely with our clients to ensure that they have longer term, balanced portfolios in place which are best able to ride out the inevitable ups and downs of the financial markets.

This is not to say that we do not advise clients on shorter-term actions should they be necessary – something we have been busy with in recent weeks in the face of rising inflation and the resulting increase in interest rates, two upward trends we anticipate continuing during the rest of 2022.

But the greater focus is to ensure that our clients have the right plan for them which will evolve over an agreed period of time and give them the best possible chance of enjoying financial security into the longer term.