Mr Bear is back: sit tight because he may be with us for a while

Like Leonardo DiCaprio in The Revenant, we’ve just been savaged by a bear but we’ll probably survive. Leading UK-listed stocks have fallen 20 per cent from last April’s peak after a six-year climb, and the FTSE100 chart has taken on a saw-toothed downward trajectory that suggests, to those who rely on such indicators, that there are further falls to come.

The end of quantitative easing and the US Federal Reserve’s first interest-rate rise in almost a decade set the direction of travel. The sinking oil price, combined with worries about a global debt build-up, darkened the mood. Repeated bouts of mayhem on the Shanghai bourse, though little or nothing to do with western investors, have provided a news peg. But at least the professionals saw this bear phase coming, and will (or should) have adjusted their portfolios away from equities and towards cash, real estate, hedging plays and the safest categories of bonds. The manager of an endowment fund of which I’m a trustee told me confidently in early November, when the fall had reached 10 per cent, to expect the same again in the near term: so far he’s bang-on.

Seeing a well-signalled and long-anticipated market shift coming is a lesser skill than knowing how far it will go, however, and your guess is as good as his or mine as to where the bottom might be: whether to sell or sit out is, accordingly, a matter of individual risk tolerance. I met a reader last week who looks after the fortunes of several wealthy families; he had slipped out of a City seminar full of others in the same line of business — they were listening to experts on who’s doing what to who in Syria — to give me a quick seminar of my own on how the rich and their advisers, with an eye to the very long term, react to bouts of market turbulence like this one.

The approach tends to be defensive in good times as well as bad, he explains, because his client families tell him that if he’s smart enough to double their money it really won’t change their way of life; but if he accidentally halves it, that’s a serious problem.