PA ANALYSIS: Smart investors may be buying rather than selling this summer

As the month of May trundles into view investors will be thinking about the traditional summer-proofing of portfolios, but the shrewdest among them may see more opportunity than danger.

PA ANALYSIS: Smart investors may be buying rather than selling this summer


There are plenty of reasons to park a large proportion of your portfolio in cash and run for the hills (or the beach) but if you dig a little deeper the picture is more nuanced.

Yes we have ‘Brexit’, the US election, and various flashpoints of geopolitical instability around the world such as the migration crisis in Europe and North Korean sabre rattling in Asia, but from an investment point of view these could be more noise than signal.

Brexit is unlikely to hit stocks outside of the UK, the US election will create a lot of headlines but not trouble many domestic facing companies there, and the North Korea situation tends to always involve a lot of barking without any bite. 

The VIX, generally accepted as the best measure of market volatility and by implication ‘fear’, has settled down notably over the past several weeks after the well document tumultuous start to 2016.

In fact, it has dropped down to levels not seen since before the China lead mini-crash in August.


If this relatively steady period does extend into the start of the summer then investors who had been planning to shut up shop might start to dip their toes into the market waters and put the kind of momentum into asset prices that seemed unlikely to materialise three or four weeks ago.  

Markets experts of various stripes were rushing to proclaim 2016 as a year of volatility in January, and that may still transpire to be the case, but if a widespread sentiment that the rest of the year will be more benign takes hold, a lot of money that was being parked in ‘risk-off’ positioning could find its way back into the market as the weather heats up.


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