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Investment Committee Meeting Minutes - August 2015

  • By Richard Ellis
  • 01 Sep, 2015

Our investment meeting ordinarily is a review of the previous month, however given the volatility in world equity markets over the last couple of weeks, this month we focused on the extraordinary market conditions.  We have therefore replaced our usual minutes with our thoughts on what has happened in world markets and what the immediate future may hold.

Fraser Heath Market Update

Our investment meeting ordinarily is a review of the previous month, however given the volatility in world equity markets over the last couple of weeks, this month we focused on the extraordinary market conditions.  We have therefore replaced our usual minutes with our thoughts on what has happened in world markets and what the immediate future may hold.


Market weakness had mainly impacted emerging markets and commodities. Signs of a slowing down in the Chinese economy have weighed heavily on the Chinese stock market. While in the developed markets shares are typically owned 80% by institutions and 20% by private individuals, this position is reversed in China. Inexperienced investors have been hit hard.

More significantly for western economies is that the actions that the Chinese government are taking to halt the slide and allay fears of a slowdown in the economy have not allayed fears. If the Chinese economy buckles this will have a significant impact around the world and it is this fear that has now spread to developed markets.

Signs of the Chinese economy slowing prompted the Chinese Central Bank to take action to correct this, but this did not initially convince investors and prompted a large correction in prices.

The Vix Index (otherwise known as the Fear Index) has more than doubled amid signs of panic selling. The selling has, in many cases, been indiscriminative, with all markets and sectors being sold off, rather than those that are directly affected by the slow-down in China

In addition a lot of selling has been caused by “programme selling” where institutions are forced sellers, due to their systems automatically placing sales when an investment falls below a certain price.

August is typically a month of holidays and the low volume of trades means that the liquidity of stocks is affected. With fewer buyers in the markets stock prices fall more sharply until they can find a buyer. There is an old (and unreliable) adage of “sell in May and go away” which reflects the frequency with which summers and their trading volumes can often result in turbulence for those investors who like to actively trade.


Nobody can be sure but it is important to remember that we are long term investors.

Please also bear in mind that unless you are a higher risk investor, your portfolio will contain other investments to equities which in times like these help to reduce volatility

Fund managers are drawing their conclusions but the consensus is that we can expect more volatility and there may be further market falls.

There has been a lot of speculation about a hike in interest rates in the last few months, but an increase is less likely in the short term as a result of these market movements.


We are of the opinion that this volatility can be seen as a healthy market correction in a “bull” run rather than the start of a protracted downturn.

While for now markets do not feel good and could well head lower, the magnitude of the moves, particularly in many developed market shares with little or no direct exposure to China, do not seem justified by fundamentals.

Our main message is to be patient, hold your nerve and keep calm. Several fund managers have quoted from Kipling – “if you can keep your head when all about you is losing theirs”. This feels particularly appropriate for current market conditions.

Date of next meeting 23rd September 2015

Fraser Heath News

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By Mark Fletcher 22 Nov, 2017

The Bank of England’s decision at the start of November to raise interest rates for the first time in 10 years was widely expected and caused little initial stir in the markets. Since then the FTSE 100 has fallen a couple of percentage points at the time of writing. Perhaps the combination of negative talk around Brexit combined with the prospect of rising interest rates are starting to bring back a little fear to the market which has, for some time, felt like it has been in a state of complacency.

By Mark Fletcher 01 Nov, 2017

Most commentators expect interest rates in the UK will rise for the first time since July 2007 when the Monetary Policy Committee (MPC) of the Bank of England next gets together for its monthly meeting on 2nd November 2017. Indeed, Mark Carney said on the BBC Today programme, shortly after the minutes of last month’s meeting were released, “What we have said is that if the economy continues on the track that it has been on - and all the indications are that it is - in the relatively near term you can expect that interest rates will rise”. He went on to say, “We are talking about just easing a bit off the accelerator to keep with the speed limit of the economy”, which has been widely predicted to mean that rate rises will be gradual and measured.

By Mark Fletcher 02 Oct, 2017
There used to be a time when the market would jitter at the slightest bad news story. Nowadays it seems that record breaking storms and a war of words amongst leaders with mass devastation at their fingertips can’t shake the nerves of investors. Which is not to say that markets have been driving forward (the FTSE 100 is, at the time of writing, where it was in the middle of January) but rather there hasn’t been the volatility we have seen in recent years.
By Mark Fletcher 05 Sep, 2017
It’s always the case that news stories like Brexit negotiations stalling, the actions of the North Koreans, the daily travails of the leader of the Western World, terrorist attacks and housing market slowdowns can grip us and make us fear the worst.
By Mark Fletcher 31 Jul, 2017
June was another good month for markets, in general terms, with many of the major developed markets once again flirting with new all-time highs. However, we have a sense that all may not be as it seems.
By Mark Fletcher 01 Jul, 2017
As we can see from the above commentary, markets generally continued to make progress in May despite plenty of uncertainty and conflict around the World.
By Mark Fletcher 01 Jun, 2017

Our reason for showing these graphs is to highlight that the VIX index is trading back at 2007 levels of low volatility while stock markets are at all-time highs. We can no more see the future than anyone else but we do know that when it comes to investing, the most money is often made when every sinew in your body is screaming that it is madness to invest, and that sometimes the opposite is true.

By Mark Fletcher 01 May, 2017
A mixed set of results this month reflects the fact that markets are waiting to see what happens in various political arenas around the Globe. Politics is definitely at the forefront of most news bulletins, whether it be President Trump's latest tweets, the UK government triggering Article 50 or the fight to become the next President in France or Chancellor in Germany.
By Richard Ellis 01 Apr, 2017

It has been a strong start to the year for investment portfolios, mostly driven by signs of continued strength in the US Economy and the promise of more to come under the Trump presidency. Markets always move ahead of the economy so to make money, investors will position portfolios to benefit from what they think is around the corner. But what if the promise does not materialise? One fund manager described this recent wave of enthusiasm as the “Trump Bump” and that this may well be followed by the “Trump Dump” if the new President is unable to deliver on his campaign promises due to lack of support from political colleagues. In this respect, it seems that the failed repeal of Obamacare has given investors pause for thought over the last week or so.

While some asset classes are looking expensive, on an individual basis, there remains optimism amongst fund managers. Those who particularly seek to invest in undervalued, unloved but robust companies can see plenty of scope for increased valuations in their investment pool.

Eight years have now passed since the FTSE 100 hit its Credit Crunch low point. In investor memory, particularly among younger investors, we are getting to the point when the slide that started in summer 2007 down to its nadir risks being forgotten. We don’t know what the future holds but the past tells us that investing needs time on your hands to ride out the tough times. We’re confident that investing remains the best long term strategy for your money but make sure that you understand the strategy you are taking and that your portfolio is right for your attitude to investment risk and your time frame.

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