By John Hayward
This article is published on: 3rd March 2025
Basing investment decisions on daily headlines has led to financial loss
We are a couple of months into 2025 and many aspects of life seem to be engulfed in uncertainty which is no great shock because that has always been the standard. Recent headlines have been pretty much the same as these from the 1960s.
Not a lot really changes apart from the global population and prices. Yet it seems that very little is learned with all of this experience. People react to headlines and make decisions based on what might well be complete nonsense. The press obviously has to write stories but that does not mean that they are accurate, or even true.
“Watch what we do, not what we say.”
– John Mitchell, Attorney General to Richard Nixon, 1969
All of this has come to the fore with particular focus on Donald Trump and his team. Many people now have a negative outlook because Donald Trump was elected again. Clients have been asking me if their investments have been affected. They have been pleasantly surprised to learn that, far from the investment world imploding, the value of their investments is higher than it was when Donald Trump was elected on 5th November 2024.
Of course, markets can go down as well as up. However, history has shown us that, over time, there have been more ups than downs.
When considering savings and investments, it has often been wiser to ignore the daily headlines and allow things to sort themselves out which, more often than not, they do. We have already seen how the President can appear to regularly change his mind and moving with these political waves could lead to investment nausea.
When he was first President from 2017 to 2020, the S&P 500 index rose by 47% during his term. The message is that the United States of America is the place to have at least some money right now, if not always. The unfortunate fact of life is that stock markets appear to be more important than the well-being of people in general.
In June 2023, clients of mine decided to surrender their investment plan as they felt that they would do better in a deposit account. In 2023, with high inflation leading to high interest rates, 5% interest in a deposit account seemed extremely attractive to them. I am not certain if they are still receiving 5% but, even if they are, they are about 7% down on what they would have had if they hadn’t surrendered their policy and had left the funds intact. Added to that, they will have had to have paid tax each year on the interest whereas tax on the investment gains would have been deferred whilst within the Spanish compliant bond they had. So often, people react to the headlines, make decisions based on short-term market movements, and lose out. And then blame their financial advisers!
I discourage focusing too much on daily headlines. Other than a story about a cat rescued from a tree, headlines are rarely cheery and there is almost always nothing we can do about what has happened. By taking a lot of notice of daily news, one can be led to making decisions that will lead to regret.
For a considered approach to investing, making you aware of taxation in Spain and the UK, contact me today.
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