As noted in a January post, as October turned to November last year, the weather was awful with rain and storms aplenty. The news was dominated by conflict in the Middle East and the obvious risk to global trade if there was another massive spike in oil and gas prices.

Global investment markets were pretty depressed too, with some funds falling back to the low levels last seen during Liz Truss’ ill-fated stint as Prime Minister.

Things improved a bit in December, with lower inflation figures and an apparent pause in escalation to the conflict boosting investment markets but these gains disappeared in January as tensions rose again.

Today however, the daffodils are in bloom and it’s not just the weather outside my window that is looking sunny…

Since November 2023, a typical moderate risk investment fund has risen by more than 10%. This chart illustrates the performance of our two preferred moderate risk funds: Vanguard LifeStrategy 60% and Sarasin’s Responsibly Managed Portfolio.

While the markets are rising, energy prices are falling. A barrel of crude oil has decreased from US$82 to US$78 (with a low of US$69 during December) and a therm of UK natural gas has fallen from £79 to £54. (A therm is equal to 100,000 British thermal units or BTU, the values you have to pay attention to when replacing your radiators.) 

These declining energy prices will help to ease inflationary pressures which will in turn give central banks more leeway to start reducing interest rates. Lower interest rates are good news for the stock market; US inflation being lower than expected in recent months is primarily responsible for the encouraging stock market recovery.  

When I think back to last October, it was hard to find much positive to say in client meetings. Just a few months later, with investments suddenly looking much better, there’s a much more positive vibe to discussions.

We’ve been banging our drum about not trying to ‘time’ the markets for as long as I can remember. The last few months are a useful reminder of just how hard markets are to predict and how important a patient approach can be.