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The oft-repeated warnings of a sharp market reverse seemed to be nothing but the wailing of Cassandras - unfortunately our caution was well-placed

THREE WEEKS ago, when I briefly surrendered to the by then desperate need for some summer sun, UK stock markets were riding at an all-time high. The FT-SE 100 share index had reached 6,200 and it seemed as if the oft-repeated warnings of a sharp market reverse were no more than the bleatings of a handful of Cassandras.

As I write, the Footsie stands below 5,400, a drop of more than 14 per cent. Is this the "correction" that we were all afraid of? The immediate prospects are not good.

True, we have seen past reversals, such as the one in October last year, that almost immediately reasserted themselves.

Even so, there are underlying worries within the world economy which, if anything, are becoming worse. It is by no means clear that Far Eastern economies have found the means to address the individual and collective crises they face. As this is being recognised the impact on the West, particularly in the US, one major source of investors' funds, is becoming more apparent.

Up to now, one argument against the doom-and-gloom merchants was that walls of money from US investors were continuing to pour into their country's mutual funds, the equivalent of our unit trusts. This confidence, we were told, would help offset the negative impact of the Far East's crisis.

But this avalanche of cash was always predicated on the most human of assumptions: that markets had done nothing but rocket upwards over the past few years and would continue to do so, albeit more slowly. Now that this is self-evidently not true, and as the slowdown in the world economy continues - thereby potentially adversely affecting savings habits in the US and UK - does anyone seriously believe that investors will be so willing to put their money in equities?

Over the past few months, our Your Money section has urged caution for investors. Many of our articles have concentrated on how to build some protection into investment portfolios, by going for lower-risk equities, investment and unit trusts, plus less risky vehicles such as with-profits endowments, corporate bonds and the like. Any reader who took our advice will not have suffered to anything like the extent that the markets have.

For those who didn't, I have some small words of comfort. Investment, as you will probably be sick of hearing, is for the long term. If you believe in the underlying value of your portfolio, the only thing to do is stick with it and hope to ride out the bad times. My suggestion, however, would be to contact an independent adviser or a stockbroker and take a fresh look at your investments: there is always some corrective action to take, no matter how minor.

ON A marginally less gloomy note, welcome to a new-look Your Money section. It now includes shopping - on the assumption that all money-based activities we normally engage in can be housed under one roof. Printing wizardry means that we are no longer confined to a mere 12 pages, offering the opportunity to expand our coverage of all areas. The benefits will become apparent in the next few weeks. Meanwhile, enjoy your reading.