Global Markets Continue to Struggle
The outlook for global economies continues to look challenging, with high inflation and rising interest rates potentially tipping many countries into recession.
As a result, global stock markets, led as usual by the US, have been suffering for quite a while. Unfortunately AIM has not been immune to this, with the AIM index now down over 33% year to date.
The bear market since the summer of 2021 is one of the longest we have seen in our 30+ years in investment management. Even the financial crisis of 2008 did not last as long as this and we can only hope that we are somewhere near turning the corner.
Certainly, the recent updates from our core portfolio holdings have been largely positive, despite the challenges they face, although this has not been reflected in their share prices!
What do we do we do at the moment?
As we have previously mentioned, with the market not reflecting the general positive performance of many of the companies in our portfolios, the simple answer is, we do very little, other than drill down into the many results and updates being reported by companies and keep a very close eye out for bargains.
During previous periods of excessive volatility we recommend clients ignore the manic movements of share prices and unless there is a need to sell, the best cause of action is to continue wait for things to turn around, knowing we are well invested when the turnaround occurs.
It is worth remembering that in February 2020, the AIM market fell 36% in a month but it finished the year up 20%. A similar recovery took place after the Financial Crisis of 2007/8. We expect something similar in the near future, with the AIM of today a far higher quality market than it was in 2008.
During periods like this, we consider long-term holders of small cap shares should view the stock market as effectively closed, unless they are looking to buy a potential bargain.
Potential light at the end of the long tunnel?
Despite all of the negative news, today the Office for National Statistics announced that rather than contract as their previous reading suggested, the UK economy grew in the second quarter of this year by 0.2%. Whether this is the start of things beginning to improve remains to be seen.
The next Fundamental webinar on Wednesday 12th October at 3 pm is called AIM: cheap for good reason or bargains to be snapped up? It will be on looking back at the last quarter and reviewing the outlook ahead; including a focus on how have companies really been performing vs their stock price? To register for the webinar and to be able to view it after the event, click here.
To find out more about the benefits of investing in AIM, or if you wish to discuss the current situation, please speak to our Business Development Manager Jonathan Bramall via email [email protected] or phone 01923 713 894.