At a turbulent time for global markets, Nick Kirrage, Co-Head of the Value Team, recently sat down with the Investor Download podcast.

We discussed the current state of financial markets, reflected on the behaviour of investors and how they might best navigate the current turmoil. Below are six key points.

1. Understand what’s driving market volatility

“A huge proportion of the world is going on hiatus for an unknown period of time. Governments have woken up very quickly to the fact that they need to do something.

“There has been a huge amount of stimulus, but there will also be a huge drop-off in demand. The disruption that causes will impact the economy.

“What investors are trying to work out is what effect that will have and whether it will be short-term or long-term. That is what is destabilising markets.”

2. Investor capitulation could present an opportunity

“We use what we refer to as the “psychological circle” to try to gauge the wave of emotions investors go through when managing their investments.

“Imagine a clock face (see image below). At 12 o’clock (the top of the market) there is euphoria; a positive, ebullient environment when people are happy to buy.

“At six o’clock there is capitulation (the bottom of the market). That is when people tend to get out of the situation, selling their investments at just the wrong time.

“I would say we are currently somewhere between three o’clock (fear) and six o’clock (capitulation).

“One of the things about this phase is it can be punctuated by substantial amounts of relief and positivity. People are unsure and they can think everything is going to be okay and that’s why we get mini rallies.

“From our perspective, days of big rallies present opportunities to sell stock where we think we can do better elsewhere. The big negative days, where no one seems to want to buy a single company, could present opportunities time to be buying shares.”

Investors psychological cycle