Now isn't a good time to invest
We’re frequently asked whether now is a good time to invest. With rising political uncertainty, fears about valuations, and the prospects of a global slowdown appearing prominently across the news media, it’s understandable that people want reassurance.
But these concerns, as well as various others, never entirely disappear, and so the best time to invest is often when it suits you as an individual. Being invested in the market means that you benefit from the power of compounding returns – essentially reinvesting profits to generate additional returns over time.
Aren’t markets becoming more volatile?
If it feels like market volatility has risen, you’d be right. While markets rose steadily after the immediate shock of the Covid-19 pandemic, their upward trajectory has been impeded by global conflict, surging inflation, and co-ordinated interest rate rises by some of the world’s largest central banks.
But volatility can create opportunities for active investors to back attractive businesses at compelling prices. Long-term investors would have had the opportunity, for instance, to buy into the market at multi-year lows sparked by coronavirus lockdowns. Large-cap US stock benchmarks quickly surpassed all time highs prior to March 2020 after dropping steeply due to the pandemic.
What if there is a recession?
While there are concerns that steeply rising interest rates, needed to tackle decades high inflation, could cause an economic slowdown, a long-term investor should accept that they will be exposed to up and down markets. However, recessions are temporary, and the long-run path for economies and stock markets is to grow over time, meaning that any worries investors have should be mitigated by a long-term investment horizon.
Provided you have a sensible financial plan that incorporates a diverse investment portfolio, you should be able to wait out any short-term correction in prices, and keep on track with your longer-term financial plan.
![](/siteassets/imagery/in-page-imagery/article-block/what-if-there-is-a-recession-article-block.jpg?width=460&height=280&mode=crop)
Does high inflation make this a bad time to invest?
Rising prices mean we’re all paying more for the goods and services we use, and it can also mean that investment returns are reduced in real terms. But rather than meaning you shouldn’t invest, it’s about ensuring your portfolio is diversified enough that it has exposure to assets that can perform well during periods of high or rising inflation.
Stocks and shares, property and commodities tend to perform better than cash or bonds during periods of rising inflation. Interestingly, our analysis shows that UK stocks tended to outperform their global peers during high-inflation periods, such as in the 1970s, most likely due to the UK market’s longstanding and relatively high exposure to energy and commodity businesses. This would make the likes of Royal Dutch Shell a good inflation hedge, while we also believe in the long-term story of Amazon and Microsoft given their exposure to the digital transformation for businesses and migration to the ‘cloud’.
At Quilter Cheviot, our specialist investment managers can help you manage your wealth through bespoke investment portfolios to ensure the right investments for your individual needs, with the flexibility to protect your portfolio during market downturns.
If you would like to find out more, download our ‘Lessons from history’ guide, outlining what we have learnt from more than 250 years of investing. Alternatively, contact one of our investment managers using the form on the right hand side.
Author
Busting the myths that stop you from investing in your future
Quilter Cheviot is cutting through the many myths that surround investing to help you take a fresh look at your finances, evaluate whether they’re robust enough to support your plans and prepare properly for the future you deserve.