Now is the time for some cool heads and calm advice

Published on Friday 15 February 2008 20:12

OUR ten brave contestants in the IFA of the Year competition could not have imagined a worse start to this year's contest.

As if the market mood on the start date of 19 January was not grim enough, with the FTSE100 down from 6,200 at the start of the year to 5,901.7, it turned positively black on 21 January – the first trading day of the competition. Markets round the world nosedived. The following day, the US Federal Reserve cut interest rates 75 basis points. But the FTSE100 kept falling.

Growing fears of a recession in the United States, coupled with worries over the health of credit insurers or "monolines", combined to batter investor confidence. The Fed has since cut rates by a further 50 basis points and now there is talk of more cuts as recession fears deepen.

With markets volatile and investors apprehensive, the need for cool heads and calm advice has never been greater.

While all of the contestants have suffered losses, the spread of funds chosen, with many holding a significant percentage in cash and fixed interest, has helped to cushion the falls.

With the market mood so febrile, little wonder the majority of our IFAs are staying on the sidelines for now and not using recent falls as a buying opportunity. However, the prospect of continuing reductions in interest rates should help steady the market in the months ahead.