While the FTSE 100 started the year well, it’s now been well and truly caught up in the global trade war. On Friday, the blue-chip stock market index fell about 5%. Today, it’s down another 5%.
These falls are no doubt a little scary for a lot of investors. Right now, many are in panic mode. I’m not though – here’s a look at how I’m handling the current environment.
It’s a mess
The economic situation really is a mess. As a result of Donald Trump’s tariffs, there’s a huge amount of uncertainty. One major issue is that many companies could be looking at significantly lower earnings as a result of the tariffs.
Take a company like Rolls-Royce, for example. It sources components for its engines from a range of different countries. So it could take a substantial hit from the tariffs.
Not helping here is the fact that at this stage, we don’t really know how much of a hit different companies are going to take. I’d say most probably don’t know themselves at present!
The other big issue is that a global recession (economic slowdown) is looking increasingly likely. Right now, businesses don’t have the confidence to spend, and consumers are also reigning in their spending. A recession could hurt businesses in a range of industries, including banking, construction and retail.
My strategy
Now, I’ve seen this kind of uncertainty – and market meltdown – before. Many times in fact, because I’ve been investing for over 20 years now. I’ve invested through the Global Financial Crisis of 2008/2009, Brexit, the coronavirus pandemic, and many other unsettling events. They’ve all been scary.
But here’s the thing – the market has always recovered.
So what I’m doing now is:
- Staying calm – I don’t want to panic and do anything irrational.
- Thinking long term – I have a 20-year horizon so I have plenty of time on my side.
- Looking for investment opportunities – history shows that market sell-offs can be a great time to invest.
- Drip feeding capital into the market – picking the bottom is really difficult so I’m investing small amounts of money bit by bit every few days.
This strategy’s worked for me before. And I’m optimistic it will work for me this time (in the long run).
An opportunity?
One FTSE stock I’m looking at – and believe is worth considering today – is
Polar Capital Technology Trust (LSE: PCT). It’s an investment trust with a technology focus.
In mid-February, this trust was trading for around 375p. Today however, it can be snapped up for 243p.
With this trust, investors get exposure to lots of high-quality technology companies including the likes of Apple, Alphabet, Nvidia, and Amazon. And all at a discount too – currently the trust is trading at a 9% discount to its net asset value (NAV)
Of course, while the tech sector has a lot of long-term potential, companies within it aren’t immune to the tariffs. Apple, for example, could be looking at a big hit to its earnings in the near term.
Taking a long-term view however, I think this trust will do well. In a world that’s becoming increasingly digital, I see tech as the place to be.
