Market volatility: our view

Important Information

We want to make investing with us simple and straightforward for all of our clients.

Please select your investor type from the options below.

Alternatively you can register or log in to an existing account.

Please note that by making your selection here you are agreeing to the Woodford Investment Management Ltd Privacy Statement and to our Terms and Conditions.

Neil Woodford 25 August 2015 Est. reading: 2 min read

Throughout my career as a fund manager I have been reminded, regularly, of the markets’ ability to surprise and alarm investors. It really is at times like this when Kipling’s advice to keep your head when all about you are losing theirs, is particularly apt.

The past few weeks in global financial markets has been just such a time. It appears that investors everywhere are dramatically rebasing expectations. The principal trigger for this market rout has been the combination of weak macro data from China along with the precipitous fall in Chinese equity prices, which has confounded the authorities’ increasingly clumsy and apparently desperate attempts to stabilise the market.

Regular readers of our blog will not have been surprised by either of these events. We have spoken about the equity market correction in China, which started in earnest in June and have been commenting on the weak China growth story for more than a year. Indeed, the strategy I have pursued since June last year has emphasised the weak global economic backdrop, led by slowing growth in China and its impact on global commodity prices.

I say this now to remind investors that these events, which triggered yesterday’s global equity panic have been embedded in the expectations that we have in place for the stocks we have chosen to invest in – and indeed those that we have chosen not to.

Consequently, little that we have seen recently with respect to macro fundamentals has come as a surprise, including today’s policy response in China (lower rates and more liquidity) or for that matter Renminbi devaluation.

We remain cautious of the global growth outlook and, on balance, believe that interest rate increases, both in the US and here in the UK, are further off than consensus has hitherto believed. Weak global growth and productivity, deflation and excessive debt remain our principal concerns.

With respect to the UK, where growth has been comparatively strong globally, we worry about the unbalanced nature of that growth (disproportionately led by consumer spending, which is reflected in the disastrous balance of payment deficits in recent history).

At the corporate level, we have also commented on the dangers posed by the gap between equity valuations (inflated by QE) and economic fundamentals. This is especially relevant because of the weak earnings backdrop.

We will continue to focus on businesses that do not need a broad economic revival to meet expectations but, as always, we will also look for opportunities in areas of the market where the falls have been heaviest and where we may not already be exposed.

It is always difficult to remain focused on fundamentals when markets fall dramatically. The distraction of seeing share prices fall indiscriminately can be overwhelming and distort rational perspectives. At times like this, having a few grey hairs helps, as does reminding yourself of Kipling’s timeless adage.

Woodford Investment Management Ltd is authorised and regulated by the Financial Conduct Authority (firm reference number 745433). Incorporated in England and Wales, company number 10118169. Registered address: 27 Old Gloucester Street, London, WC1N 3AX.

© 2020 Woodford Investment Management Ltd.
All rights reserved.

Are you sure?

By disagreeing you will no longer have access to our site and will be logged out.

Privacy Preference Center

Experience Tracking

Lets our analytics service track you across our different websites and enables data sharing among our different marketing tools.

AMCV_[Tracker ID]@AdobeOrg (Adobe), [Tracker ID]@AdobeOrg (Adobe)
Adobe Analytics (helps us provide you with more relevant experiences and content based on your likely interests). Cookies: demdex, dextp, dpm, DST, DSTJS
Twitter personalisation (by better understanding how devices are related, Twitter can use information from one device to help personalize the Twitter experience on another device). Cookies: personalization_id
Heap Analytics (provides metrics on user behaviour and actions throughout the site). Cookies: _gid, _hp2_id.[Tracker ID],_hp2_props.[Tracker ID], _ga, _mkto_trk, optimizelyBuckets, optimizelyEndUserId, optimizelySegments, raygun4js-userid, _attribution_referrer, _csrf
Adobe Analytics (provides you with more relevant experiences and marketing messages based on your likely interests). Cookies: _tmae ,ev_sync_dd,ev_sync_yh,everest_g_v2,gglck

Traffic Metrics

Allows Woodford to aggregate information on website usage and popular content

_ga, _gid
Google Analytics (tracks and reports website traffic and user behaviour): Cookie: CONSENT
New Relic (application and server performance monitoring – allows us to spot problems with our website code and improve them to keep things running smoothly). Cookie: JSESSIONID
Adobe Analytics (provides you with more relevant experiences and marketing messages based on your likely interests). Cookies: __qca,__smToken, _ga, _mkto_trk, _rtbmedia

Search History

Populates the 'recent searches' section of the website navigation.

wf__recent_searches_untracked

Close your account?

Your account will be closed and all data will be permanently deleted and cannot be recovered. Are you sure?