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Posted on: 16 Mar, 18

The overall direction of developed stock markets is a relentless and continual rise in value over the very long term, punctuated by falls. It’s important not to let global uncertainties affect your financial planning for the years ahead. Individuals who stop their investment planning, particularly during market downturns, can often miss out on opportunities to invest at lower prices.

Such volatility is less frightening if you take a longer-term view. It’s important to stick to your strategy and keep moving ahead consistently by spreading risk and growing your wealth. It’s volatility in stock markets that make investors nervous. However, on the flipside, not all volatility is bad: without volatility, stock prices would never rise.

Higher inflation and faster interest rate rises

At the time of writing this guide in February, markets had reacted to the signs of faster wage growth and a strengthening US economy that may lead to higher inflation and faster interest rate rises. The global sell-off began following a solid US jobs report that fuelled expectations that the Federal Reserve would need to raise interest rates faster than expected because of the strength of the economy. That concern prompted the pullback from stocks.

The Bank of England seemed to offer support for the view that rates in general are on an upward path with a strengthening UK economy, meaning interest rates are likely to rise sooner than the markets were expecting.

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