Investors take a breather from the bad news

IF you are like most investors, good news regarding the investment markets can come and go without much attention – but it’s the bad news that make your ears pick up or sends a shiver down your spine!

Like all news, be it political, financial or general – it’s the bad news that sells and so our front pages are often more depressing than you would wish for – sadly human interest stories about minor triumphs in everyday life just aren’t going to shift volumes of newspapers – however, a scandal involving a crooked MP is much more interesting to the average reader.

The same principle applies with investments or disappearing pension pots – and the bad news has been dominant in global markets in recent years, starting with the banking crisis of 2008 and more recently the sovereign debt crisis focused on Europe.

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But other things have been happening. And any investor wanting an antidote for the grimmer headlines might like to reflect on the following recent news snippets:

1. In August US stocks rose for the sixth consecutive week, the longest rally since January 2011.

2. Reuters reported that US consumer sentiment improved in August to the highest in three months as sales at retailers and low mortgage rates spurred Americans to boost their buying plans.

3. Germany’s Finance Ministry says the nation’s tax income was nearly 9% higher in July from a year earlier – helped by recent wage increases and underlying the continuing strength of the economy. – The Associated Press, Aug 20, 2012.

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4. Sweden’s centre-right prime minister has backed a cut in corporation tax for his Nordic state as it defies the gloom of the euro zone. – Reuters, Aug 18, 2012

5. At home - UK jobless claims unexpectedly fell in July and a wider measure of unemployment dropped to its lowest in a year as the Olympic Games created jobs, showing the labour market’s resilience. – Bloomberg, Aug 15, 2012

6. Australia is the new safe haven. Robust tax revenues and restrained government spending have put this ‘AAA’-rated nation on investors’ radars. Government 10-year bonds have returned 17% so far this year. – WSJ, Aug 14, 2012.

7. Japan has offered its strongest indication yet that it sees a way out of deflation next year, after being mired in a corrosive mix of falling prices and weak economic growth for much of the past two decades. – Reuters, Aug 17, 2012

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8. Norway’s sovereign wealth fund – the largest in the world – is planning to take on more risk as it seeks to exploit its role as a strategic investor. – The Financial Times, Aug 20, 2012

Now, none of these headlines are news to the markets. And pointing them out this way does not constitute a forecast. But it is worth reflecting on the fact that the economic and financial news is not all bad at the moment.

Sometimes, as consumers and investors, we can become overwhelmed by negative headlines and can end up making counter-productive decisions about our lives based on historical events over which we have no influence.

The fact is markets quickly incorporate news, good or bad. And for every person who capitulates and sells their shares or portfolio based on news, someone else with a less negative view and/or a longer-term horizon is on the other side of the trade buying.

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Maybe the best approach is to start reading ‘the pinks’ from the back page!

You must of course remember that fund prices can fall as well as rise. Past performance is not a guide to future performance.

Graeme Leeburn, of Leeburn Financial Planning LLP, Chartered Financial Planners,

56 Bachelors Walk, Lisburn, BT28 1XN.  Independent Financial Advisers.  Tel: 028 92660661. www.leeburnfinancial.com Email: [email protected]

Leeburn Financial Planning is a Limited Liability Partnership (NC690). Registered in Northern Ireland. Authorised and regulated by the Financial Services Authority.