Market turbulence

Dominic Thomas
March 2025 • 3 min read

Market turbulence

If you have followed the news, you will appreciate that global stock markets have been falling sharply over recent weeks. This is in response to the wave of changes and abandonment of normal policy by the new, rather insane US Government.

Your portfolio will have fallen. It will recover, the question is really how much worse will things get and how long before they recover. To which the answer is, “I don’t know” and nobody knows.

I would remind you that we have seen significant falls in market values every year (on average -15% every year at some point), it’s simply that some years you and the media pay more attention.

You can view your portfolio in our secure portal or on the platform portal that we are using for you, typically Fundment, Nucleus, Parmenion or Transact. However I would caution against doing so regularly as this will merely increase your anxiety, which isn’t good for your health or your financial plan.

Many of us realised that Trump was not someone to be trusted, based on his actions over many years, but despite his very odd decades-long special relationship with Putin, it seems that there are still swathes of Americans who are unable to discern this (even if it smacked them around the face with a kipper). Denial and distortion of facts and reality are in evident supply, unlike truth and justice.

In terms of helpful and reassuring information and our approach to evidence-based investing, JP Morgan produce data about the worst declines in valuation during each calendar year. Admittedly, this is the FTSE All-Share not the global market, but the principles are exactly the same. It’s a chart that you would have seen before in our client magazine Spotlight.

The chart shows the grey bars as the final return for the calendar year since 1986. It shows that of the 39 completed years, 27 (70%) were positive, 12 (30%) were negative. That means that roughly one year in four is negative. The red dots indicate the worst or deepest decline in each of those years. Every year has a ‘crash’. The average drop is 15% and the median (the middle value when all lined up in order) drop is 12%.

This knowledge hopefully provides some comfort about the reality of ‘drops’ each year, but the message is really – don’t panic, stay in your seat. Admittedly you could say “sell it, get me out” but this will actually realise a loss (make it real rather than notional) and it is unlikely that you will re-invest at a point that is any more favourable, if you do that’s probably luck rather than skill.

We have built your financial plan making allowance for these scenarios. Investments do not grow in straight neat lines; they are erratic. The greater the proportion you hold in equities (shares), the more volatile, but also the greater the reward over time. Your plan is designed for your entire lifetime and beyond.

As of now (March 17^th 2025), the global equity market is down -3.75% since the start of 2025. Global Bonds are up +0.85% and a 50/50 portfolio is down -1.73%. The numbers in pounds will look considerably worse than this, they always do because you relate to pounds in terms of your income and spending rather than your capital, but it is healthier to consider it in percentage terms. The chart below shows the Year to Date (YTD) figures for Timeline Tracker 100 (green) 50 (yellow) 0 (red).

Looking at a longer term perspective helps provide some context.

None of us like to see portfolios hit heavily, it is unnerving. As I have said, this is currently down to the politics of the US Government, with proposed tariffs and appointing billionaires to act as parodies of Bond villains providing ‘advice’ to the White House. Personally, I hope that he is removed from office as soon as possible, but it is also clear that the Vice President is perhaps even worse, possessing very little understanding of how the world works.

Generally in life we tend to assume that wisdom is correlated with age. At the age of 78 I find no evidence that Trump possesses any. Mr Vance at age 40 certainly hasn’t acquired any yet.

BACK TO ALL BLOGS

Market turbulenceJemima Thomas2025-03-20T16:51:04+00:00

The cautious investor

Dominic Thomas
Feb 2024 • 2 min read

The cautious investor

Rising interest rates that offer ‘certainty’ often appear a good solution for investors in an uncertain world. The thing about uncertainty of course is that it’s always present. You can remain holding cash in deposit accounts for years, trying to avoid market falls in the belief you are being prudent; sensible with your money. The uncomfortable truth is that we won’t know if you were right until many years down the road.

What we can do is look back at history and observe how missing out on returns impacted the valuation of portfolios, even if it was simply for a week or a month, the impact of sitting this one out can have (and has had) a substantial impact on portfolios. Second truth bomb – I have no idea when this might happen again. I don’t have a crystal ball to be able to predict such things.

I came across this neat little video by Dimensional (an excellent Investment Management firm with the unusual evidence-based approach whilst clutching a bunch of Nobel prize winners for their work in finance and economics). The data considers January 1997 until the end of 2021.

The key for investors, as it is in many aspects of life, is one of patience.

Dimensional video

BACK TO ALL BLOGS

The cautious investorJemima Thomas2024-02-23T09:27:47+00:00

ONE FOR THE GARDENERS

TODAY’S BLOG

ONE FOR THE GARDENERS

It has not been easy to find positive aspects of the pandemic, yet I have been fortunate enough to really enjoy working in the garden. I am not an expert, I have generally been handy at knocking stuff down, cutting, chopping and digging, but it took a pandemic to really switch me on to the joy and healing power of gardening and giving it more thought.

One of the surprises has been the short life of many blooms. There was a lot of groundwork, preparation, tending and expectation before the flower finally appeared, only to disappear within a day or a couple of weeks. Thankfully, I planted lots of plants that flower at different times, but the saying “the constant gardener” is very much my experience, different seasons bringing different work from deadheading to mulching.

It occurred to me that there are many lessons from gardening to learn when it comes to investing and indeed running a business. One of the things we attempt to do is equivalent to pruning – we might train some plants along a particular line, some stakes, supports or tied attachments might be needed to get the plant growing in the right direction. Perhaps cutting off some stems, to refocus the plant energy into the direction of the result we seek. We might want to give a plant a little extra care at times, responding to the local weather. That sort of thing.

TENDING YOUR PORTFOLIO

This is similar to rebalancing your portfolio. On a simple level this is taking profits, the discipline of actually buying at the bottom and selling at the top – within a range that makes sense for your planning objectives. There is a sense of tidying up, returning the portfolio to its intended structure, albeit larger and more mature (hopefully). Essentially getting it back on track having been permitted to grow within reason. Left unattended for too long the work becomes more significant and perhaps requiring larger tools and much more energy to do the job.

The problem with rebalancing is that we do need to do this regularly – not every month, perhaps not even every year. There is research about this which concludes that a rebalance adds real value if it’s about every 18-36 months (but not mandated that way). A key issue is the degree of movement away from the original plan – (we call this tolerance). A 10% trigger seems to hold credibility with evidence that this adds value over the long-term.

SEEKING MARGINAL GAINS

I’m conscious though that the process is long-winded. We need to advise you to rebalance or make adjustments, then get your permission and finally implement the changes and check that they have been done correctly. You are busy and probably get fed up saying “yes please do that” each time I ask you to confirm your permission. As a result, we are advising use of a Discretionary Fund Manager (DFM) to implement these changes based on agreed criteria. This means that there won’t be delays in optimising your portfolio, no need for you to agree each minor adjustment.

Normally I am not a fan of a DFM, but this is a fairly unique solution. Its incredibly competitive at 0.09% and takes an evidence-based approach using low-cost funds in a way that matches our own approach and investment philosophy.

Occasionally in gardening some decisions need to be made about what is altered to give the best chance of obtaining the results you seek. At your next review I shall be explaining what pruning, weeding, digging, mulching and reorganisation needs doing for your planning of future harvests

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk
Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

PRIVACY POLICY | DATA PROTECTION

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

PRIVACY POLICY | DATA PROTECTION

ONE FOR THE GARDENERSDominic2025-01-21T15:53:24+00:00

YOUR PORTFOLIO

TODAY’S BLOG

YOUR PORTFOLIO

I suspect that you have heard the expression “look after the pennies and the pounds look after themselves”. Well, a small win this week in that your investment costs will have reduced for clients using our portfolios. One of the fund management groups that we use (Vanguard) decided to reduce their annual management charges. Its not a massive reduction when taken in the context of a larger portfolio of funds, but every little helps. The reduced charges have been applied already.

We have also been reviewing our ESG portfolios. I was challenged the other day by suggesting that clients be opted into ESG portfolios with the option of opting out rather than being asked if they would like to opt in. I can see some merit in this, but it seems somewhat problematic when you consider that ESG portfolios are generally a little more expensive.

Dominic Thomas
Solomons IFA

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk
Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

PRIVACY POLICY | DATA PROTECTION

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

PRIVACY POLICY | DATA PROTECTION

YOUR PORTFOLIODominic2023-12-01T12:17:09+00:00

What is the best way to save for retirement? Part 6

Part 6 in the series “What is the best way to save for retirement?”

Inflation – Power to the people?

Inflation is probably the most underestimated factor within finance and economics. It has a massive impact on what you really need to do and frankly drives the need to ensure that your assets increase in-line with or preferably above the rate of inflation. This sounds easy, but it isn’t. You know all about inflation as it is, I don’t need to explain much. All I need do is ask you to remember going to the sweet shop and what you used to be able to buy, or perhaps how much you bought your first home for.

We forget what we don’t see

Inflation at the moment is historically low, despite what the media and politicians may suggest it is low. In fact ONS statistics reveal that the annual rate of RPI (retail price inflation) has not been above 5% since 1990. That’s now 24 years ago. It has varied since then between 0.7%-4.5%. This is why so few of us really give much thought to the impact of inflation. However, the longer term average rate of RPI since 1948 has been 5.5% and ranged between 2.9%-6.3% as a long term annual average. This was largely due to high levels of inflation in the 1970’s (24.9% in 1975) when we had a decade of high inflation rates, often forgotten, but which in turn led to tighter monetary control introduced as “Thatcherism”.

Size matters after all

My figures from the previous posts about the size of pot you need are therefore somewhat off. Why? Well because I suggested a target income of £20,000 a year from the age of 65, assuming a starting age of 35. I did this deliberately. Investors get really quite distressed by “real figures” the numbers invariably look too big and too terrifying. Here’s what I mean.

Warning: Explicit Information

£20,000 inflated at 3% a year for 30 years becomes £48,545. This is the same amount in real terms (if inflation runs at 3%). So I hope that you are sitting down. Rather than needing a pot of £500,000 to pay £20,000 a year (4% annuity) you really need £1,213,625 in real money. Yes that’s £1.2million. Rather than investing £305.69 a month (increasing by 3% a year) you actually need to invest £741.98 a month – more than double. You are no richer in reality; it’s just that inflation has been properly taken into account. The same facts are accurate, but the amount you really need to invest is considerably more.

Is time is on your side?

If you are rather closer to 65, say you are 50, you still have 15 years of inflation on £20,000 a year which becomes £31,160… worth the same amount… penny drops (literally) on the reason why I asked you to recall the childhood trip to the sweet shop. So in this example, a 4% annuity to provide £31,160 needs a fund of £779,000. You have 15 years to achieve this amount, hopefully you have made a start.

What about that buy to let property purchase idea?

So let’s turn to the property purchase option if you recall it. I suggested saving for 10 years for a deposit. Well starting with the end in mind we used a 5% rental yield. This would need to be £48,545 in 30 years time, so the property value would therefore need to be £970,900. So if property prices rise by inflation (3%) then you would need to be buying a property for roughly £400,000 and a 20% deposit would be £80,000 saved over the first 10 years, so rather than saving £214.71 a month, you really need to save around £450 a month (increasing by 3% each year for 10 years) and taking on a commercial mortgage for £320,000 – that’s quite a lot of debt.

Is it real?

The problem with real numbers is that they are pretty alarming. In reality you will hopefully have various sources of income for your retirement, hopefully including the State Pension. However the key issues are how well your portfolio performs and it will rise and fall in value which can be concerning. So its important that you consider the inflation adjusted or “real” returns. To give an example, the FTSE AllShare Index has averaged 5.9%pa above inflation since 1956. The average rate of inflation over the same period was 5.6% – so the actual FTSE AllShare return was 5.6%+5.9% = 11.5%. Since 1991 (to end of 2012) inflation has been 3% and FTSE AllShare real return 5.7% = actual returns of 8.7% but what you will notice is that the real return is pretty similar (over the longer term) at about 5.6% but not in the short term!

A suitable portfolio and strategy

Its important to get your investments right as in practice most people cannot stomach the volatility within shares. So you wouldn’t have all of your portfolio in shares, you would typically have some in Bonds and perhaps a bit in cash, thereby reducing but protecting the returns. Getting this balance right is not as simple as picking funds or using some sort of off the shelf “model” it needs to be thought through carefully…. Which is what I help clients do.

Its about your lifestyle, not the money

It goes without saying that £20,000 is not regarded as “a lot of money” by some people. In fact, £20,000 is a fair bit less than the average wage. However, great financial planning is not about value judgements about what is and what is not a small or large amount. No, its all about helping you to get clear about the lifestyle you want and what you need to do to achieve it, if that is possible, when considering your available resources, your appetite for and ability to take risk. When they say time is money, it is perhaps most pertinent in relation to inflation.

Was this helpful? Just plain scary? Too much? What questions do you now have? Email me or post a comment. Tomorrow I will conclude by providing some pointers to what I mean by “lifestyle”. Thanks for reading and here’s something you may remember from the 1970’s.

Dominic Thomas: Solomons IFA

What is the best way to save for retirement? Part 6Dominic2025-02-03T13:27:37+00:00

Advantage?

As Wimbledon continues, the temptation to use more familiar metaphors is fairly irresistible. So what do I mean by “Advantage”? well in short, I believe that the investment world is largely stacked against investors like you and I. It is full of jargon and “complex arrangements” and a constant array of “winning strategies”. The plain truth is that the investment world has conspired against you in order to part you from your money, which is then often invested in a way that sees your share of the upside considerably reduced and yet your share of the downside largely inflated.

You could be forgiven for believing that investing is gambling and I’m often asked what I think will happen to…(fill in the blank). In other words a forecast or more likely a guess. I have no idea what the markets will do tomorrow, this afternoon or indeed next month. Eh? aren’t I meant to? well – only if you believe that investing is about picking the right stocks and timing the markets. The truth is that I cannot do this successfully, by which I mean repeatedly with a proven process. In my defence I would suggest that NOBODY can and have plenty of evidence to back up my claim. However it is possible to have a worthwhile (profitable) investment experience.

Investment is actually quite dull, scratch that, its actually boring. So the investment world tries to gloss things up with performance charts and star managers/performers along with lots of bright lights and noise. All but a very small proportion of this is utter hogwash. Successful investing is about applying discipline and stopping yourself from getting caught up in the ego inflamed noise that is reported across all financial media. I actually don’t care if Mr B is the best investor since 1948, it makes no difference to you or me. What counts is your investment strategy and successfully reaping the returns for the risk you are prepared to take.

One of the many advantages of proper financial planning is that we figure out what returns you need and what level of investment risk is therefore required to achieve your objectives. We then construct an efficient portfolio which has a long-term perspective and don’t meddle with it. By efficient I mean that the method of investing successfully is minimised and handled carefully, not cheap or cheapest, but considerably less expensive. We apply discipline to a process that works.

So as you read that the FTSE100 had fallen over 800 points since May 22nd what are your thoughts? panic? does it make a difference to you? Are all of your investments in the FTSE100? No (well I hope that’s your response). Investing is long-term, so why are you investing money if you need it in the next 5 years? if you are only investing in a few shares (the FTSE100) then you do not have a diversified portfolio which is very unwise unless you are a beginner in the investment world (literally starting out to build your funds). If you are tempted to sell your holdings having seen them fall, are you expecting things to get worse? and when do you expect them to recover? how would you know where the bottom is? (they don’t ring a bell). Are you tempted to sell on the way down and buy once the good news is out? (classic buy at the top, sell at the bottom, which has the only outcome of financial ruin).

Discipline and theory are all well and good, but do you possess the self-control to stay the course when all around is panic and mayhem? Isn’t it time that you reclaimed some investing advantage, by having a properly costed, diversified portfolio that is established in-line with your goals and within your risk comfort levels? Isn’t it time you had the advantage of a disciplined process with a thought through philosophy based on evidence? Its time to turn the tables on the financial services industry that have consistently failed to deliver. Hey, its your money, if it doesn’t deliver, it will be you that has to live with the consequences, not the investment world. So pick up the phone and have a conversation with me to find out what advantage Solomons can provide.

Dominic Thomas – Solomons IFA

Advantage?Dominic2025-02-04T16:00:43+00:00