Investors are right to disregard falling oil prices and stay positive

Global investors should remain positive and shrug off plunging oil prices, following the collapse of the Doha summit with the world’s major oil producers, aimed at capping output.

Prices plummeted after OPEC has been incapable of arranging a deal to restrict production.
Despite this, it would appear that international investors have, in the main, paid no heed to the falling prices and maintain a generally positive outlook.  This, to my mind, is the right course of action.

Stock markets too have taken the news on the chin.  The robust association between global stocks and oil prices, which was the trademark of the market downturn earlier in the year, is now not asserting itself.

This could indeed be a result of investors concentrating on the ongoing positive stream of U.S. economic data, coupled with a degree of stability taking hold in China’s economy.  In addition, reduced energy prices are, naturally, good news for the non-energy related sectors on global stock markets.

As such, the optimum way for investors to grow and maximise their wealth is to allay risk and make the most of the inevitable upsides by maintaining a well-diversified portfolio, across geographical regions, asset classes and sectors.

Furthermore, in regard to the forecast for the second quarter of 2016, deVere Group’s International Investment Strategist, Tom Elliott’s predictions were featured in the Financial Times, amongst other media, last week: “Whilst there are certainly risks, and there always are, I believe the second quarter of 2016 will be considerably less volatile than the first.

“There are three reasons for this. First, the U.S. Federal Reserve is far more emollient in its forecasts for U.S. rate hikes than it was three months ago, while recent economic data suggests continuing stable economic growth in America.

“Second, the much-forecasted hard landing for the Chinese economy has failed to materialise. At 6.5 per cent the economy is still growing at a decent clip.

“Third, a major source of weakness on financial markets in recent years has been the resources sector. But this is going through a period of self-healing. Certainly, it remains very susceptible to news flow from China regarding potential demand growth. But the over-supply issues that bedevil companies in the resources sectors are being addressed through the axing of new energy and mining projects, and closing of uneconomic operations. Companies are bearing down on operating costs, and less generous but more sustainable dividend policies.”

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