After years of steady appreciation, real volatility returned to global equity indices on Friday 5th Feb. The January US non-farm-payrolls report signalled to the markets that the Federal Reserve will move soon to raise US interest rates and continue the unwind of the decade-long low-interest rate environment.
The reaction of global stock markets was swift. The key US indices sold off heavily ahead of the weekend and included a “flash-crash” for the Dow Jones in the last hour of trading – at its worst the market was down 1,600 points before rallying 750 points into the close. Global markets followed the U.S’ lead and each scheduled U.S macroeconomic data release is being viewed as a catalyst for fresh volatility.
Savers and investors who had been tempted along the risk curve by the ultra-low interest rates of the last 10 years are now seeing a reversal of gains on their equity funds holdings.
As part of any balanced portfolio, the cash allocation needs to be optimised. Significant levels of cash savings are still languishing in accounts which pay less than 0.2% per annum.
Against this volatile backdrop there are two welcome developments. The launch of Open Banking – whilst not a “big-bang” moment – signals a new era in competition for banking services. In addition, the imminent end of two Bank of England operations – the Funding for Lending and Term Funding Scheme - mean that both high street and challenger banks can no longer rely on the BoE back-stop for funding their lending operations. They need to attract savers with competitive rates and good service.
Volatility is not an issue for SynerGIS Bonds. Our fixed rates mean your investments are protected from stock market fluctuation - allowing for peace of mind.