However the recent downturn, which has seen the FTSE All Share slide from heights of nearly 7,000 to roughly 6,070 at the time of writing, is something investors should not fear, according to Chelsea Financial’s Darius McDermott.
Performance of FTSE All Share since May
Source: FE Analytics
McDermott (pictured) says the slide is "a buying opportunity full-stop", adding: "There is still good value in equities. If I liked equities a month ago [when the market was at the top] why wouldn’t I like equities now that they are 10 per cent cheaper?"
Even classically bearish FE Alpha Manager Martin Gray, who heads up the CF Miton Special Situations fund, agrees markets are looking a lot more interesting now that they have come down significantly.However, he is encouraging investors to be patient because markets may still have further to fall.
"There’s no appetite for piling into risk assets with bond yields at these levels. They’ve risen pretty rapidly," he said.
"At the moment there’s no point in buying in too early, especially when I think there’s still reasonable further downside. Why pile in? We don’t have to pile in, we’ve got cash, let’s bide our time."
Gray is currently holding nearly 30 per cent in cash in his £863.1m fund, which he says he will use to take advantage of truly cheap valuations in the market.
"I think at long last we’re at the end of a fantastic run in most risk assets. Yes, things are cheaper, but we’re just seeing a bit of froth coming off. I think there’s still some real selling to come."
"We’re going to watch for a bit, but things are getting more interesting out there," Gray added.
The manager welcomes continued volatility from the markets because he says it will create even more buying opportunities.
He adds that there are still several headwinds capable of knocking markets lower – namely Mark Carney taking over as Bank of England governor from Mervyn King.
"Bernanke looks like he’s not going to be around much longer either and Super Mario’s 'whatever it takes' is really going to be put to the test this year," he said.
Rob Burdett, co-head of multi-manager funds at Thames River, says he and co-manager Gary Potter are sitting on the fence and waiting for the macro picture to become clearer.
"We’re neutral on equities and underweight bonds, which has allowed us to outperform our peers in this rut," he said.
"Over the medium-term we still think you should be overweight equities, but there is a heightened short-term risk we get contagion and yields will spiral a bit further."
"You’re right to be watching this very closely. We think our next move is a buy rather than a sell, but right now we’re sitting on the fence."
McDermott agrees that macro events are likely to knock markets lower in the near-term.
Although the market has not yet dipped below the critical 6,000 mark, McDermott says 5,500 is the natural bottom of the market in the current conditions.
"There’s been a strong bull market but you can’t get away from the main issues that are out there. Just the thought of QE (quantitative easing) stopping has taken the market down by 15 to 20 per cent."
However, he thinks investors should take advantage of current valuations by drip-feeding smaller amounts into the market every month. This strategy should help to smooth the volatility that is likely to come through the next several quarters, he says.
While McDermott favours the US and Japanese economies in the near-term, he says the funds that have been hit the hardest by the recent market volatility are those in the emerging markets – particularly in Latin America.
"There are lots of things to look at, especially in Asia and potentially Latin America," Gray added.
"History tells us that when risk comes off, developing markets get hit far harder than anything else. A 10 per cent fall is a correction in developed markets, but a 20 per cent fall is probably a correction in emerging markets."
Since the start of the year, the MSCI Emerging Markets index is down 10.38 per cent, compared with gains of 5.11 per cent from the FTSE and 17.28 per cent from the S&P 500.
Performance of indices year-to-date
Source: FE Analytics
The MSCI Latin America index has lost even more over the period, shedding 16.28 per cent.
"These markets are the most interesting. They are the long-term future anyway. But rising long-term interest rates are not good for them," Gray said.
McDermott says investors plunging into the developing world need to take a longer-term view. If their investment horizon is one to three years, he suggests sticking with the developed markets, which he expects to continue to outperform in the near future.
"I can see why the dollar will stay strong in the short-term and emerging markets tend to underperform in strong dollar markets," he said.