Fears over the health of the financial system are mounting among investors, sending stock markets plunging around the world yesterday.
Stock markets around the world endured a rout yesterday, with the FTSE 100 plunging 200 points, or 5.2 percent, to hit a six-year low of just over 3,600 points.
Concerns over the financial health of the banking sector contributed to the sharp decline, with HSBC's announcement of a 62 percent fall in profits coming a week after the record £24 billion annual loss at RBS. Miners and drugmakers were also hammered, along with the general retreat in bank shares.
Indices in the US have fared still worse, following Friday's shock announcement that economic output contracted over the final three months over last year at a far sharper rate than had previously been thought. The Dow Jones in New York touched a 12 year low of 6,763, falling 4.2 percent, while the S&P 500 retreated by 4.7 percent to 700 points.
Three straight weeks of stock market losses have hammered the share portfolios of private investors. Responding to the latest falls, Stephen Thornber, a Threadneedle Global Equities Fund Manager, said that adopting a cautious strategy was key to surviving the current volatile markets.
"As long-term investors, we are looking for quality companies that can survive this economic cycle and emerge in a stronger position," he commented. "With this defensive strategy in mind we are looking for companies with strong balance sheets, companies that can not only survive the current economic climate, but can emerge stronger and those able to use their financial resources to increase market share or acquire assets from weaker competitors."
