When I was a very young child, I remember getting worried about walking to school when it was raining. Between the puddles, the soaked clothes, and the “wet dog” smell once I actually got to school – poor weather seemed to bring a host of unwanted problems. One especially dreary Spring day, I stood at the door not wanting to go outside when my grandma saw me pondering and said, “You can’t change the weather, Gary. When it rains, bring an umbrella.”
This straight forward wisdom struck a chord with me and since then being pragmatic about most situations seemed to be the answer.
Over the last three months, the market volatility around the world seems to have caught a lot of people by surprise. While the word “complacent” seems to be uttered more regularly by pro traders, it’s honestly hard to say the “clouds weren’t in the sky” and the warnings signs weren’t apparent. From the beginning of the year, crude oil started to make it’s not so subtle collapse from $90 a barrel with clear signs of oversupply paired with weakening demand. Meanwhile, other commodities such as copper also plunged as demand from around the world waned. This, of course, was coupled with US equity markets surging to all-time highs even as economists around the world reported on slowing growth and consumption.
Then came June and the sudden downfall of the Shanghai Composite Index. First it was an 8.5% drop, the largest single day plunge since 2007, and then it was a steady torrent of bad to worse days interspersed with various government measures meant to halt an all-out rout. Meanwhile, North America seemed to be a bastion of safety and hope, and with the US dollar being the major beneficiary for a time – it all came suddenly crashing down last week.
Commentators were stunned. Investors froze. The music stopped for a moment. Just as the clouds gathered, and the unmistakable chill of a low-pressure system swept the markets – the torrential downpour eventually came. While everyone in the market was effected – the only real difference between the one who’s drenched and the one who’s still carrying on with confidence was whether or not they brought an umbrella. It’s ironic how being just slightly more prepared can make such a monumental difference.
So while there’s a lot of worry and rumblings of panic on the street – I would remind investors to take a pragmatic approach to our shared circumstances. And as grandma would say – We can’t change the weather outside, but we can choose to bring an umbrella.
Chippingham Financial Group
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