Financial Focus Winter 2018 Newsletter

new record was set for the Standard & Poor’s 500 (S&P 500) index on 22 August 2018, when the market reached the 3,453rd day of a run that started on 9 March 2009. The index has also achieved numerous all-time highs as part of this run. Bull markets are typically defined as periods starting with a market low point and ending when the relevant index falls by more than 20% – and they rarely last as long as this. The S&P 500’s current bull market started when the index hit the memorable low of 666 during March 2009. By 22 August 2018 the Index was at 2,871, a 331% increase from the depths of the financial crisis and an annual growth rate of 16.6%, before any dividends are considered. Although the Dow Jones Industrial Average (DJIA) is often quoted as the performance measure of the US stock market, investment professionals prefer the S&P 500 as a benchmark. As its name suggests, the S&P 500 has 500 constituent companies, whereas the DJIA has just 30. Over the same period, the UK benchmark the FTSE 100 roughly doubled in value. However, for UK-based investors, returns from the US could be marginally greater than those implied by the S&P 500 because the pound was at $1.376 on 9 March 2009, whereas it was trading at only $1.291 by 22 August 2018. INVESTMENT STRATEGIES The nine years of a US bull market offer investors some lessons: ■ ■ International diversification of investment can deliver rewards. UK-based investors can pay the price of favouring funds investing in their home country. While many of the UK leading companies are multinational, no UK-listed companies have matched the performance of the likes of Apple or Facebook. ■ ■ Currency can play a part in adding to returns – or reducing them. Changes in currency valuations impact on both foreign-listed shares and UK-listed shares of companies with overseas earnings. ■ ■ Timing entry and exits to a market can be difficult. As the graph shows, US markets have seen a few small dips since 2009. Exploiting them successfully by selling at the high and buying back after the dip may appear easy – but only with hindsight. Staying invested and ignoring the market ‘noise’ has proved to be a sensible strategy. Despite the success, the long-term rise in US shares has been labelled the ‘most hated bull market’ in history. Almost since its start in 2009, many market watchers have predicted its demise. So far, they have all been proven wrong. If you want to review the global spread of your investments, why not ask us to calculate a geographical breakdown of your portfolio, drilling down into each fund’s holdings? B The value of your investments and the income from them can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances. 3 Winter 2018 A Lessons from a record bull run The US stock market recorded its longest ever bull run in August 2018. INVESTMENT iStock/mmeee 2009 2010 2011 2002 2003 2014 2015 2016 2017 2018 0 1,000 2,000 3,000 Standard & Poor's 500 Index SAMPLE