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May stays

Daniel Lane

Daniel Lane - Fidelity Personal Investing

It’s back to the negotiating table for Theresa May after winning last night’s ballot of Conservative MPs, on whether she should remain party leader, by 200 votes to 117.

Although that might have been the easy part. The prime minister still faces a struggle to get the Brexit deal she agreed with the EU through the UK parliament, with opposition parties and a faction of her own party still not convinced. May will hope her journey to Brussels today proves fruitful in clearing up assurances over the nature and timescale of the Northern Irish border backstop.

So, the state of play doesn’t look terribly different than it did yesterday and it looks like the market agrees, with the FTSE 100 staying level on the news. Wednesday’s vote may have provided short-term security for May but, with so much uncertainty still left even beyond the March 29 deadline, investors are looking for something a bit more concrete.

The danger here for those sitting on the sidelines is that they can easily get left behind once confidence is renewed. The big market-moving events are inherently hard to predict but I’ve lost count of the times the market has slowly trickled up or down without anyone really noticing. And keeping too much powder dry also begs the question - when do you get back in and where?

I always remember Fundsmith’s Terry Smith saying there are two types of investor - those who can’t time the market, and those who don’t know they can’t time the market. And even if we think we can time our decisions, the US election and UK referendum have shown us that we aren’t even that great at predicting the outcome, given a 50/50 chance.

What’s more, sitting in cash through fear or opportunism means completely halting the compounding effect that lies at the heart of investing. If you’re adequately diversified, at least some parts of your portfolio should be firing at any one time. So what’s a good way to diversify when the outcome looks so blurry?

Gold is often the go-to asset for equity investors when the nerves kick in - with gold and equity prices historically passing each other in opposite directions, the metal remains a popular hedging asset. George Cheveley, manager of the Investec Global Gold Fund, part of the Select 50, explains: “If you look at gold and equity prices, to some extent every time the US index has fallen more than 20% in a short period, gold has tended to be positive.”

Another way to tackle volatility is to acknowledge it and use it to your advantage. For professional investors, the extensive company coverage is done long before a decent share price lets them hit the buy button - often the opposite process to personal investors coming unstuck by snatching at cheap shares that become cheaper still. Alex Wright, manager of the Fidelity Special Situations Fund, starts from the bottom-up, analysing company fundamentals and talking to suppliers, customers and competitors, aiming to sort the opportunities from the cheap-for-a-reason firms.

We all want the upside without the discomfort of the bumpy periods but in the end, it’s something we have to deal with as investors. Simply fleeing when times look uncertain stops the long-term benefits of being in the market and, crucially, makes sure we aren’t there when things do start to look brighter.

More on investing in uncertain times

Important information

The value of investments and the income from them can go down as well as up, so you may not get back what you invest. The Select 50 is not a recommendation to buy or sell a fund. This information does not constitute investment advice and should not be used as the basis for any investment decision nor should it be treated as a recommendation for any investment. Investors should also note that the views expressed may no longer be current and may have already been acted upon by Fidelity. Fidelity Personal Investing does not give personal recommendations. If you are unsure about the suitability of an investment, you should speak to an authorised financial adviser.