Various metaphors emerged yesterday (17/03/22) for the Bank of England’s current predicament. Juggling balls, balancing acts and tightropes all appeared in wealth managers’ commentaries following the latest interest rate hike.
Of course, current global events do complicate monetary policy and cause headaches for those managing money. But, is there a time when this is not the case?
Take a look at the past six years.
During this period the UK voted for Brexit and – after years of negotiations – has now left the EU; Donald Trump became president of the US; the Covid-19 pandemic emerged; a cost of living crisis; and, most recently, Russia invaded Ukraine.
All of these events led investors and wealth managers alike to say these are “unprecedented times” for markets.
With barely time to breathe between them, each event dominated the news cycle until the next one came along. At that point, it seems everyone – markets included to a certain extent – forgets about the previous headline grabbing event.
For example, the seven-day average puts UK Covid-19 cases at over 108,000 a day. Previously, this number would have been hard to avoid. Now, you have to go out of your way to find it.
The same is true with market commentary.
At the start of the year, all predictions and views were accompanied with a warning about the uncertainty of Covid-19 and how it could have a significant impact on markets.
Today, Covid-19 is barely mentioned at all.
If we simply jump from one crisis or major event to another, will there always be a certain amount of uncertainty priced into markets?
Markets have certainly fared better than many feared in recent years. After plunging in March 2020, markets bounced back quickly and continued to perform well throughout 2021.
Even now, with war in Europe having broken out three weeks ago, the FTSE 100 is already showing signs of recovery from the initial falls. It is up around 4 percent this week.
Of course, without a crystal ball it is impossible to tell what will happen to markets going forward or how central banks will react. Many are predicting a sustained fall, particularly when the impact of sanctions begin to be felt more acutely.
What does seem clear is that there will likely always be some kind of “unprecedented event” for wealth managers to consider. Perhaps this goes hand in hand with living in a 24 hour-news cycle (of course thewealthnet contributes to this, sorry!).
If not addicted, wealth managers are certainly comfortable walking a tightrope, balancing risk and reward, while fighting off headwinds in challenging market environments.
