Investing panic: why my portfolio dropped 10% last week

Investing has been a bit of a rollercoaster recently. Katie Royals takes a look at what has caused the markets to drop and why investors are nervous.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Sixed group of millennial aged friends discuss investing

Image source: Getty Images

Investing isn’t always plain sailing. For many new investors, a market crash is something they haven’t experienced before, myself included. So when my portfolio dropped last week – by almost 10% – it was a shock.

It can be easy to panic in these situations. Understanding why the stock market falls can help make a portfolio drop less scary.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!


Why the financial markets went red

There are a number of reasons the financial markets dropped last week, including concerns about a conflict in Ukraine, worries about inflation and Covid-19 fears still looming over financial markets.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, explained: “The threat of conflict breaking out on the doorstep is hanging over European indices, as hopes begin to fade that there will be fresh meaningful moves from diplomats.”

Meanwhile, rising inflation has had a significant impact, particularly on tech stocks. As speculation increases about inflation being here to stay, investors are starting to worry about central banks taking a more aggressive stance. This has led to market falls.

High inflation affects a company’s valuation because it can cause expenses to rise while reducing pricing power.

How individual stocks are performing

While the markets fell overall, individual stocks all performed differently. When trading stocks and shares, it can be useful to keep an eye on how individual companies perform.

Some stocks – like Barratt Developments in the FTSE 100 – have experienced significant falls, as investors fret about the impact of an expected further rise in interest rates on long-term demand.

Streeter explained: “Just like tech exuberance in the era of cheap and easy money, it’s feared the red hot market will cool dramatically when mortgage payments start increasing and the cost of living squeeze intensifies.”

Meanwhile, tech-centric companies continue to suffer. Streeter warns that companies that “launched onto the market with prospectuses full of promise over the last 18 months are now seeing confidence in their business models fading fast, as the era of cheap money hurtles to a close”. 


There is some good news…

It’s not all bad news for those investing. Some companies are currently performing better than others.

Vodafone is performing well as speculation about its future has increased interest in the company. A potential merger could be on the cards with Three UK, and there are also talks continuing with rival Iliad to merge business in Italy.

“The deals would potentially create a telecoms powerhouse and give Vodafone much more clout across mobile and broadband operations. It would also layer up Vodafone with armour to fend off private equity bidders thought to be circling,” Streeter explains.

Unilever is also performing better than last week. Investors reacted poorly to its proposal to buy GSK’s consumer division. The company’s decision to walk away from the deal and not offer over £50 billion was welcomed by investors.

What’s next for the financial markets?

Sadly, none of the issues have been resolved, and there’s still a lot of uncertainty hanging over the financial markets.

Without a crystal ball, it’s impossible to tell what will happen next. However, it seems unlikely the turbulent times are behind us just yet.

The IMF has warned that tighter monetary policy from the Federal Reserve (the US central bank) might strengthen the dollar and weaken developing nations, who are still recovering from Covid-19. This is raising concerns that the global economic recovery may not be as strong as first thought.

Meanwhile, in China, there are still lockdowns due to the country’s zero-tolerance policy on Covid-19. This could well have an impact on the markets and put further pressure on supply chains.

Finally, geopolitical tensions surrounding Russia and Ukraine are still high and will likely continue to cause uncertainty in the markets until they are resolved.

This doesn’t mean you should be put off investing. If you want to start investing, and potentially take advantage of lower market valuations, setting up a stocks and shares ISA could be a good starting point.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

More on Personal Finance

Note paper with question mark on orange background
Personal Finance

Should you invest your ISA in a model portfolio?

Which model ISA portfolios offer both high performance and low fees? Hargreaves Lansdown, Interactive Investor and AJ Bell go under…

Read more »

Economic Uncertainty Ahead Sign With Stormy Background
Personal Finance

Is it time to exit emerging markets investments?

Investors may well be sitting on losses from emerging markets funds. Is it worth keeping the faith for a sustained…

Read more »

Personal Finance

Share trading? Three shares with turnaround potential

Share trading has been difficult in 2022, but which companies have turnaround potential? Jo Groves takes a closer look at…

Read more »

Man using credit card and smartphone for purchasing goods online.
Personal Finance

Revealed! Why Gen Z may be the savviest generation when it comes to credit cards

New research reveals that Gen Z may be the most astute when it comes to credit cards. But why? And…

Read more »

Environmental technology concept.
Personal Finance

The 10 best-performing sectors for ISA investors

The best-performing sectors over the past year invested in real assets such as infrastructure, but is this trend set to…

Read more »

Road sign warning of a risk ahead
Personal Finance

Recession risk ‘on the rise’: is it time for investors to worry?

A major global bank has suggested the risk of a recession in the UK is 'on the rise'. So, should…

Read more »

pensive bearded business man sitting on chair looking out of the window
Personal Finance

1 in 4 cutting back on investments amid cost of living crisis

New research shows one in four investors have cut back on their investing contributions to cope with the rising cost…

Read more »

Image of person checking their shares portfolio on mobile phone and computer
Personal Finance

The 10 most popular stocks among UK investors so far this year

As the new tax year kicks off, here's a look at some of the most popular stocks among UK investors…

Read more »