Following a long period of steady rises in share prices and generally calm financial markets, the stock markets have been hit by turmoil. The US stock market fell sharply on Monday 5 February 2018, and other markets around the world followed suit with sharp falls on Tuesday. The turmoil continued throughout week 6.
“It is not unusual for the stock market to experience significant fluctuations. In fact, it is far more unusual that there has been such a long period of very stable markets. Both in 2017 and in the years prior to that, LD’s portfolios have delivered very good returns,” explains Chief Financial Officer Charlotte Mark.
Since the start of the year, LD has reduced the equity exposure in LD Discretionary slightly. This move was prompted by concerns that the high valuations of shares and credit bonds, combined with expectations of rising interest rates, would not provide a basis for continued positive performance in the equity markets.
“Although we prepared for this by reducing our risk exposure, the market turmoil has nevertheless led to losses in LD Discretionary and the other portfolios. LD is monitoring developments closely and is continuously assessing whether the risk needs to be reduced further,” says Charlotte Mark.
The recent fall in prices has had a clear impact on equity portfolios, but bond portfolios have also been affected by falling prices, which can be linked to uncertainty about interest rate trends. The turmoil is thus affecting both equities and bonds, as can be seen from the performance of LD Discretionary.
Strong returns in recent years
The recent financial turmoil, which has led to losses in portfolios in 2018, should be viewed in the context of the positive performance over a longer period. Looking at performance over the last 12 months, the results are generally positive, and in 2017, good returns were achieved in all portfolios, with the exception of Maj Invest Kontra. Kontra has a very specific investment mandate and is designed to act as a counterbalance during periods of financial turmoil. The portfolio is currently showing a positive return for 2018.
