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Keep calm and zoom out

CompareStructuredProducts.com - 07/08/2024

Markets across the world were shook on Monday with Japan at the eye of the storm. Tokyo’s Topix plummeted over 12% wiping out its yearly gains and labelling the event another ‘Black Monday’.

The magnificent seven and the S&P 500 all took a hit over US recessionary fears following from last Fridays weaker than expected jobs report.

The FTSE 100 got caught up in the chaos, falling below the 8,000 mark on Monday but with no economic data to suggest a reason for the fall other than behavioural, mimicking moves across the world.

During events or panics such as these its important for investors to ‘zoom out’ and remind themselves that often they are short lived and part of market dynamics. As a general rule markets take the stairs up and the elevator down.

As of Wednesday the Topix has rebounded approximately 9% from lows, S&P 500 c.3% and the FTSE over 2% back to the 8,100 level.

Most UK retail structured product investors are unlikely to be phased by these events because of the defined contractual returns, longer term durations and in built protection. Holders with structures approaching their end of term may have been wobbled however contracts remain in tact with kick-out/income payments being dependent on the next observation point at the pre-defined market level based on the that recorded at commencement of the contract.

By way of an example, Walker Crips Annual Kick-out Plan (UK) Issue 7 has its final observation on 19 August 2024, with the FTSE required to be at or above 7,558.59 for six years of snowballing coupons and a 51% return. It would be impossible to predict whether the FTSE could drop to these levels in the next couple of weeks however there is a certain degree of safety in the 500+ point buffer zone. If another contagion event was to occur and the FTSE did have a significant downfall – investors original capital would almost certainly still be protected by the 40% downside protection barrier.

Data sourced from CompareStructuredProducts.com and Investing.com

Structured investments put capital at risk.