New analysis from Asset Risk Consultants provided more evidence of staying invested during periods of volatility as private client portfolios bounced back during the second quarter. They are now firmly in positive territory for the year, despite April’s falls.
According to ARC’s latest data, the average return of the ARC Sterling Steady Growth Index (based on the most common risk profile run by discretionary investment managers) rose by 3 per cent in the second quarter, resulting in a year-to-date performance of 1.3 per cent. The rally was broad, with small-cap stocks performing in line with large-cap, although style was an important factor, with growth stocks once again dominant.
There were significant currency moves over the quarter as the dollar weakened amid mounting concerns over US deficits and credit downgrades. The US dollar fell by around 6 per cent against sterling, 9 per cent against the euro and 11 per cent against the Swiss franc. This volatility in currency markets had a material impact on the performance of the ARC Wealth Indices.
Dan Hurdley, Managing Director, ARC Research, said: “Despite a sharp sell-off following Trump’s ‘Liberation Day’ tariff announcements in early April, equity markets staged a strong recovery in Q2, shrugging off both trade and geopolitical concerns. Boosted by strong earnings announcements from ‘big tech’, US equity markets outperformed and ended the quarter at record highs.”
Hurdley said that the market recovery serves as a powerful reminder of the risks involved in trying to time the markets. It reinforces the time-honoured advice of staying invested during periods of volatility. ARC’s analysis shows that missing the best 90 days within a global equity portfolio over a 24-year period (2001-2024), which equates to just 1 per cent of days missed, would have reduced annualised returns in GBP by 11.7 percentage points.
He added: “One of the difficulties in attempting to actively time markets is the contribution to equity returns that can occur in a single day. Markets tend to go up gradually over the long term, but this trajectory is usually punctuated by some precipitous drops. These often occur during heightened volatility with many of the best days following poor ones.”
