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Market Update

November 2014 Update

Global concerns and poor retail performance make for a volatile month, but it’s not all bad news

Equities had a tumultuous time in October. Following a dip in the middle of the month, markets rebounded, with many equity markets making up the lost ground.

During the first two weeks, global concerns seemed to make investors go into panic mode, leading to steep stock market declines. These concerns included the Ebola outbreak, worries about slowing Chinese growth, and the looming spectre of deflation in Europe.

However, the US Federal Reserve meeting towards the end of the month helped provide some reassurance. It confirmed the end of the quantitative easing and gave a relatively upbeat assessment of the US economy, while issuing a statement confirming it plans to keep interest rates low for a “considerable time”.

In the UK, equities dropped to long-term lows mid-way through the month, before recovering almost all of the lost ground. In the end, the FTSE All-Share Index finished 0.7% lower. This was the second consecutive month that UK equities have underperformed bonds and commercial property.

Shares in mining and energy companies were among the biggest losers. Falling commodity prices led to losses across the mining sector, including precious and industrial metals producers. The oil & gas sector also suffered as the price of crude dropped close to a four-year low. The FTSE contains a relatively high proportion of mining and energy companies, partly explaining the market’s comparatively poor performance.

Lacklustre UK corporate news also worried investors. In the retail sector, Next announced a profits warning, blaming unseasonably warm weather for the fact that consumers haven’t felt the need to refresh their winter wardrobes. The food retailing sector’s woes continued, with Tesco announcing that the hole in its finances was even bigger than previously thought. Shares in the company fell to their lowest level since 2003.

October was also volatile for bond markets, with the factors that affected equities tending to move government bonds in the opposite direction. In this environment of volatility and uncertainty, corporate bonds marginally underperformed.

Commercial property once again produced positive returns, this time boosted by investors’ traditional end-of-year buying spree. Capital values were lifted by exceptionally strong investment demand and a limited supply of quality stock. Rental growth is also now showing signs of gaining momentum and contributing to returns.

Should I make any changes to my investments?

Everyone’s circumstances are different and we aren’t able to give you advice on what is appropriate for you. As always, if you are considering your own position, you should remember why you invested in the first place and consider the lifespan of your investments. Most importantly, you should seek financial advice before making any changes to your investments.

One way in which you can help reduce the impact of any market volatility is to spread your investments across different asset classes and regions. For more information about investing across different asset classes, take a look at our An introduction to diversification in multi-asset funds guide.

Remember that before making any changes to your investments, you should seek financial advice. If you don’t have a financial adviser, you can find one local to you by visiting find a financial adviser, which is responsible for promoting financial advice in the UK.

All figures quoted are in sterling terms to 31 October 2014 unless otherwise stated.

The information contained in this article has been derived from sources which we consider to be reasonable and appropriate. It may also include our views and expectations, which cannot be taken as fact.

Investment markets and conditions can change rapidly and, as such, the views expressed in this Update should not be taken as statements of fact nor be relied on when making investment decisions. Forecasts are opinions only, can not be guaranteed and should not be relied on when making investment decisions.

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