Investors who missed the rally should take advantage of recent falls to invest says Hargreaves Lansdown

13th June 2013


Hargreaves Lansdown is telling investors to embrace the sell-off in shares, concentrate on long goals if they are invested, and use it to look for opportunities if they missed the rally. The broker notes that global stock markets have continued to fall as the World Bank cuts its growth forecast following Ben Bernanke’s suggestions the Federal Reserve may reduce the amount of quantitative easing sooner rather than later. “This has become a typical reaction that we have seen time and again in recent years,” it says.

The note adds: “Previous suggestions that quantitative easing will stop has caused markets to fall in the past, only for central banks to come out and reassure investors.  Following Ben Bernanke’s statement stock markets have moved from a slight fall towards a correction (a fall of 10% or more from the recent peak) and in the case of Japan some are suggesting it has entered bear market territory with a fall of over 20%.”

But Hargreaves lists some reasons for perspective. It points out that even after the recent falls the Nikkei 225 is still up 20.65% in 2013, whilst the FTSE 100 is up 9.2% this year.

“The US continues to pump $85bn a month into the US economy. It notes that the Federal Reserve has linked their quantitative easing programme to the unemployment rate and  have stated they will only consider stopping it when unemployment falls to 6.5%. US unemployment had been falling in recent months but actually rose in May to 7.6%,” it says.

The note adds that the effects of Japanese quantitative easing programme announced in March, which will pump 7 trillion Yen into the Japanese market, have yet to been seen. The Japanese are electronically printing $70bn a month and using it to buy bonds and equities. Whilst the sum is slightly less than the US, Japan’s economy is a third of the size. Having only just started this programme it is still too early to fully see its effects.

Adrian Lowcock, senior investment manager at Hargreaves Lansdown says: “Too often investors place too much importance on the most recent piece of information with all other facts being ignored.  We shouldn’t ignore the actions already taken, there has been a clearly orchestrated and concerted effort from the world’s major central banks to raise asset prices. I for one would not take a bet against the combined actions of Federal Reserve, Bank of Japan and Bank of England. Investors should focus on their long term goals and not get carried away by short term falls in the markets. This recent fall gives investor who missed the market rally at the start of the year a second chance to invest and benefit from the long term growth in equities.

“The best fund managers are those who are able to protect investors money when markets fall, putting them in prime position to benefit when stock markets do recover. Many are using the recent weakness as an opportunity to invest in their favourite companies.”



18 thoughts on “Investors who missed the rally should take advantage of recent falls to invest says Hargreaves Lansdown”

  1. Pavlaki says:

    Shaun, Do you think that Grexit will ever resurface? The last time round it was quietly dropped when Merkel was made aware of just how much was at stake but there has been plenty time since then for France and Germany to reduce their exposure to Greece. Have they done so? I don’t have access to these numbers but it could indicate what the future is for Greece if they need to get the begging bowl out again.

    1. Anonymous says:

      Hi Pavlaki

      The Greek political establishment seems to have rejected even the possibility of Grexit. Perhaps they think that they are committed now after what has taken place. It is also true of course that the political establishments around Europe benefit from the jobs and sinecures which surround the Euro and European Union. So barring a revolution Greece seems to have rejected what I have always believed is the best route out of this mess.

      The French and German banks have in essence shifted most of their position onto the European taxpayer via the bailouts of the EFSM,EFSF and ESM. Oh and more indirectly via the European Investment Bank…

      1. Anonymous says:

        Jobs ‘and’ sinecures?

  2. Anonymous says:

    Hi Shaun,

    Manufacturing has hugely changed since the 1970’s, both it’s technologies and products. UK Car manufacturing was believed to be indespensable and therefore was nationalised to keep people working. I for one am very glad not to drive a state manufactured clunker like the Austin Allegro.

    Now cars are sold across Europe, in the 1970s consumers were restricted mostly to domestic brands – French drove French cars, Italians drove Italian cars and most Eastern Europeans waited 20 years for Ladas (and worse).

    I don’t know how UK or European car plant workers wages compare in real terms, but UAW workers in the US must be much poorer in real terms today.

    All the above factors make a meaningful assessment of manufacturing’s contribution more difficult …..

    1. Jim M. says:

      Hi Expat and hi Shaun

      Sadly it’s an all too familiar theme, as Mr Springsteen tells in My Hometown

      Now Main Street’s whitewashed windows and vacant stores
      Seems like there ain’t nobody wants to come down here no more
      They’re closing down the textile mill across the railroad tracks
      Foreman says these jobs are going boys and they ain’t coming back to your hometown

      1. Anonymous says:

        Hi Jim M

        Thanks for the reminder of a song I should recall better than I do as I have a copy of Born in the USA. Actually I was watching an interview of Nils Lofgen last night online which reminded me of the days I saw him as a solo artist -his party piece was a trampoline whilst playing guitar- before he joined the E Street Band.

        Billy Joel covered it too in Allentown

        Well we’re living here in Allentown
        And they’re closing all the factories down
        Out in Bethlehem they’re killing time
        Filling out forms
        Standing in line.

        1. Noo 2 Economics says:

          My brother used to work in Bethlehem steel in the 70’s outside Buffalo New York State. It was something to see, the site was 13 miles long and about 2 miles wide with it’s own private railway, now it’s just a wasteland with collapsed roofs and trees growing in the middle of the foundries and old warehouses.

          1. Anonymous says:

            Bulgaria has many industrial wastelands too. We can’t blame “nasty capitalists” for their demise.

            Springsteen plays the theme labour vs management, but there is a third economic participant – the consumers. Consumers benefit from capitalism’s relentless hunger for improvement and reinvention.

          2. Noo 2 Economics says:

            “We can’t blame “nasty capitalists” for their demise.”

            I wasn’t??

          3. Anonymous says:

            Correct, you weren’t.

            Springsteen sings about economic pain, and I wanted to highlight both sides of Schumpeter’s creative destruction.

  3. Anonymous says:

    Great column Shaun. When my family stayed at Bijela on the Montenegrin Coast last year our favourite restaurant was Leskovački roštilj (Leskovac Grill) right on the Adriatic. It did a steady business but was never packed. We heard from my wife’s cousin and her husband, who go to Bijela every year, that other years it was always packed and the only way you could get a table was to book in advance. Their explanation was that Bijela and other Montenegrin tourist towns had been losing business to Greece. Even Serbs who could be counted on to favour Montenegro because people there speak the same language were going to Greece because it was better value.
    Andrew Baldwin

    1. pavlaki says:

      That’s surprising! Greece is still not cheap to eat out although the cost of accommodation has dropped quite a bit. Portugal and Spain have been more proactive in dropping their prices (and maintaining value) than the Greeks. I was in Athens and the south of Greece in April this year and taverna prices were high. 20 years ago when I lived there (in the Drachma days) you could eat like a king for the equivalent of a few pound a head. I now find Greek tavernas to be some of the most expensive in all of the countries I regularly visit.

      1. Anonymous says:

        Thanks for your reply, Pavlaki. Regrettably, I have never been to Greece so I can’t compare prices with Montenegro from personal experience. Anecdotal evidence is always dangerous, but a Bosnian Serb couple living in Ottawa who are good friends of ours left for Bosnia and Serbia last month and they are planning to spend part of their time in Greece. Unfortunately, I didn’t ask them what part prices had played in their choosing Greece over Montenegro.

  4. Anonymous says:

    Hi Dutch

    The UK has reverted to implicit methods to bailout RBS with Funding for Lending and Help to Buy improving the pricing of much of its asset book. Even so I fear further revelations as we have to miss-selling of interest-rate swaps and other derivatives still to come. Any rights issue is likely to be post election unless some real calamity forces their hand.

    Portugal seems set to find itself slipping further down the road as it sees bigger and bigger woes at BES my subject of yesterday. A rights issue this time around looks virtually impossible at a share price of only 12 cents. It is going to be a long weekend at the Bank of Portugal…

  5. dutch says:

    ‘The UK has reverted to implicit methods to bailout RBS with Funding for
    Lending and Help to Buy improving the pricing of much of its asset book.’

    You have a very diplomatic way of putting things Shaun. The whole problem with fractional reserve lending is that it eats itself when asset values start going south and a 10% tier one ratio won’t prevent a collapse once UK housing starts tanking back to long term house price/salary multiples.

    Agree,we’re unlikely to see anything this side of the election.

  6. Noo 2 Economics says:

    ..”won’t prevent a collapse once UK housing starts tanking back to long term house price/salary multiples.” Not sure it will – that would require a massive supply increase allied to a very restrictive immigration policy alongside a steadfast refusal from parents to help out their young.

    Any Government implementing the first two would find itself voted out at the next election and it’s very unlikely most parents would behave in the third way.

    That said, I would like to see a 3 bed semi priced at 3 – 3.5 times average salary – and not achieved through shrinking the size of said property proportionately!

  7. Anonymous says:

    Don’t forget the BTL/housing benefit loop, which sustains the market as more people try to invest in relatively secure assets to provide for their future, pensions being dubious to say the least. The first government to break that loop will cut house prices at a stroke. Or to impose a higher rate of CGT on BTL gains. Neither is likely. The politicians need their assets, too!

  8. Noo 2 Economics says:

    I’m curious, what’s the housing benefit loop?

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