Buying opportunity for brave investors or catching a falling knife? Investment experts share their views on current market chaos

The mantra since COVID has been “buy the dip” but the problem is that the world is now massively leveraged. A number of investors who offset one position with another, leveraging further still—only to find themselves needing to sell shares to cover margin calls. On top of that, a significant portion of the market is now driven by algorithmic trading programmes, many of which have stop-loss mechanisms built in. As markets fall, these triggers activate more selling, perpetuating the downward spiral. Years of ultra-loose monetary policy by central banks, coupled with historically low interest rates, allowed excessive leverage to build. All it took was one man and a round of tariffs to shake the system. Had it not been tariffs, something else would have eventually triggered the collapse. But the reckoning is now upon us. The once-favoured mantra of 'buy the dip' has given way to 'don’t try to catch a falling knife'. The good days are over and investors need to readjust to a new world.

The FTSE isn’t falling, it’s capitulating under the weight of a world unravelling, as what we are witnessing is not solely market volatility but a structural repricing of the global market in a potentially post-globalisation world. This sell-off is somewhat no longer technical and is instead philosophical, with investors reassessing the value of risk assets in a reality where political retaliation, not economic efficiency, sets the price. However, it's worth remembering that Britain came out relatively favourably, with the joint lowest tariff levels globally, half that of the EU. Additionally, with over 70% of FTSE 100 revenues derived from non-US markets, Britain's primary index finds itself uniquely buffered against the ongoing demand disruptions across the Atlantic. Furthermore, this re-pricing has meant that British markets, particularly the FTSE 250, are now trading at truly exceptionally attractive valuations, for those that are able to take a long-term investment horizon.

Sharp market falls like this are almost always a buying opportunity for brave investors with a long enough time horizon. The challenge isn’t logic, it’s emotion. There may well be further declines ahead, but trying to time the bottom is a fool’s game. By the time things ‘feel’ better, markets will likely have already bounced. Often, it’s better to be early to the party than to miss it entirely.