Money Times - April 3, 2018

Posted by Jill Kerby on April 03 2018 @ 09:00



Anyone who nervously watches their stock portfolio or pension fund value, checking daily unit-prices in the papers or on-line, is probably feeling a little uneasy.

They might not even be sleeping very well, depending on the kinds of stocks and funds they own.

And if they also follow Donald Trump’s tweets, which regularly include the president taking credit for any and all improvement in the US economy and especially about how well the stock market has done since his election, might be doubly concerned.

With the US markets having giving up all growth since last December, Trump  has become remarkably tight-lipped about the trillion dollar losses that have been racked up by American corporations.

For someone like Trump, for whom ratings are everything and big numbers constitute success, the reverse on Wall Street will be ignored until and if the Dow, NasDaq and S+P 500 pick up again.

And that may not happen too soon say some pessimistic commentators, at least not until everyone is clearer about the outcome of his latest tarriff war, his lack of progress on delivering infrastructure promises, the consumer spending slowdown and the worrying growth in the US budget deficit.  Had he simply stepped back and after getting his tax cut bill through and waited for the impact of the repatriation of billions of corporate dollars held offshor, recent headlines might have been more positive.

However, the markets have an uncanny knack of shadowing the political world and as one long deceased British prime minister once put it, that world is determined by “events, dear boy, events”.

If you, like Donald Trump, think every little surge or fall in share prices deserves attention, then you’re going to be on a perpetual roller coaster ride that is going to end in tears for you too.

Instead, you need to be asking, so what if the Dow is down nearly 3.5% since the start of the year?  Or the S&P 500 is down by nearly -2.3%, the FTSE 100 by -8.36% and the EuroStoxx 50, DAX and Nikkei by nearly -8%.

Apple and Facebook share prices – no doubt to the chagrin of their thousands of employees in Ireland who own some – have hit some volatility in the last month in particular (Facebook down by c5%).

But that shouldn’t matter a toss unless you’ve chosen to invest all your savings or especially pension fund money in any single share or market, despite the fact that last year the Dow jumped by 25%, the S&P by 19% and the high tech market, the NasDaq by 28%. (Even with big tech firms taking a hit, the NasDaq was still up just over 1.5%, year-to-date, at time of writing). 

Analysts and commentators are just as split in trying to explain what’s been happening in the Spring of 2018 as they were in the Spring of 2009 or 2010 when some predicted that it would take decades to restore the confidence and wealth that was lost after the 2008 crash of the financial sector.

The worst fears – that it was 1929 all over – never materialised of course. Bankrupt banks were bailed out, central banks forced interest rates down to zero levels to prevent mass corporate, state and individual bankruptcies and the bill was passed onto future generations.

Since then the debt mountains have just got higher, and the new normal is a mixture of low growth, uneven employment and a huge widening of the wealth gap.

And so it will continue so long as the money markets and their players (including pension funds) continue to be favoured with a regime of low interest rates and access to cheap finance from central banks. If market corrections are a natural part of investing, then we shouldn’t be in the least surprised at what has happened this Spring.

If you have a financial plan – and you should – then stick with it (my financial adviser keeps reminding me.) If you’re anxious about the markets…stop listening to the business news or reading the daily market reports.

If your plan is properly comprehensive and includes savings, protection insurance, modest debt, prudent spending and there is an investment strategy in place that you understand and can live with… then you’ve done what you can. 

The markets produce daily price snapshots. No one can accurately predict tomorrow’s price, let alone next months’. But if you do want to be pro-active and say, you belong to an occupational pension fund, and are getting closer to retirement request a meeting with your pension administrator or trustee. 

Don’t just ask about past performance, or how they think the fund will do for the next year. They don’t know.  Instead, get them to explain how widely – or narrowly - your assets are invested. 

And if they’re really doing their job, they’ll also explain the impact of all the fees, charges and commissions you’re paying, no matter how the markets perform.


The TAB Guide to Money Pensions & Tax 2018 is available in good bookshops. See www.tab.ie for ebook edition.

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