OCM Wealth Management’s CEO, Jason Stather-Lodge comments on their current positioning and amid market volatility and why there are some reasons to be cheerful:
Undoubtedly we are in a period of increased market volatility. However, despite the surrounding furore, I believe that what we’re witnessing is a market correction not a structural change in markets. Whilst short term losses are undeniably hard to watch, those investors who keep a level head and ride out this bout of volatility will be rewarded by year end. Trying to time stock markets is akin to catching a falling knife.
The best course of action as I see it is to invest in quality companies which have lower than average levels of borrowing against good cash flows. For this, we tend to look for funds that display low “beta” but also the ability of fund managers to generate absolute performance via the picking of better-than-average stocks.
Against this, we have some support from various QE programmes across the globe that will provide a floor underneath some asset classes, and therefore equity markets.
A further reason to be cheerful, going by recent economic data, is that Europe is making progress; unemployment in the region has unexpectedly fallen, while German manufacturing has expanded at a faster pace. Recent export data from Germany was ahead of expectations, which has meant that the trade balance is also significantly ahead of expectations. Economists project Europe’s gross domestic product to grow 1.5% this year, the most since 2011.
Furthermore analysts still predict profits for companies in the Euro currency bloc will increase 12% this year. This is telling us that the area is experiencing excellent conditions for companies to trade in, but we remain aware of the region’s ability to catch everyone’s colds as the weaker Euro leaves it more reliant on export growth than normal. However, using the principle of investing in good companies at low valuations, we remain positive on holding European companies.