Even though the UK stockmarket has proved resilient since the election investors now seem nervous. Overall stockmarket statistics show that volatility is low, but some individual shares have had sharp falls. Whole sectors, such as technology and mining, have suddenly seen profit taking, with buyers disappearing.

How can investors prepare their portfolios for a change in market sentiment?

In 2017, last year’s move into the beneficiaries of inflation has petered out. Belief that interest rates and commodity prices would soar triggered strong performance in sectors such as oil, mining, banks and industrials.

Enthusiasm for reflation reached its peak last November, however, and since then investor interest has returned to growth businesses and consumer staples. Recently, this has helped technology and pharmaceutical shares in particular, with many share prices moving to new all-time highs.

A bout of profit taking earlier this month proved brief and investors quickly realised that there was probably more risk in cyclical sectors. Although the US and European economies are robust, and the UK has confounded Brexit pessimists, the quality of that growth should concern investors.

Bank lending remains weak, with many bad loans still on the balance sheets of European banks. Capital investment is doing little to improve productivity. Although unemployment is now at new historic lows in the US and UK, there is little sign that inflation is becoming embedded in pay.

The boost to global inflation that surprised investors last year, was almost entirely due to the oil price rise as OPEC limited production. The subsequent oil agreement is less impressive and emerging countries that produce resources are desperate to raise earnings. This will make it hard to control output in future.

In Britain, inflation is distorted by the sharp fall in the pound that followed the Brexit vote. This may push inflation beyond three per cent over the next 18 months, but the pound has been more stable in 2017 and wage growth is lagging.

Non-food items have actually fallen in price overall over the last 12 months. Even without interest rate rises, it seems likely that inflation will naturally fall back to the Bank of England’s two per cent target. Core inflation in the US and some other major economies remains low.

Investors who were drawn in to last year’s reflation winners, such as mining, need to consider whether they are in these businesses for the long term. Many may simply have taken an opportunity to benefit from OPEC’s action, so recent commodity moves may be a signal to take some profit. Some of those shares are still at four times their early 2016 lows.

If poor productivity growth and ample supply of raw materials act to constrain prices globally, last year’s popular sectors could have a long way to fall. Oil and other commodity producers may dream of pushing up prices, but they face the powerful forces of technology pushing down costs globally and new sources of supply.

British investors, worried about the pound, have sought refuge in businesses with overseas earnings. Some of these companies are world leaders and have a competitive edge, but there are many whose scale exposes them to the global economic cycle and the vagaries of interest rates, oil and commodity prices.

Not all British businesses are wholly dependent on post-Brexit trade agreements. Housebuilders, for example, have a background of cross-party support for the need to improve Britain’s housing stock. Some other technology and online-focused businesses can pick up market share from older established incumbents, even in mature markets.

Just because one area might be moving out of investor fashion, it does not mean the stockmarket will fall. Investor focus often just rotates around sectors and exclusive portfolio emphasis on a narrow group of sectors or single business strategy can be risky.

With mixed signals on the health of the global economy, investors should consider whether their portfolios are sufficiently diversified. A spread might be wiser than just hoping for inflation and global growth.

Colin McLean is managing director of SVM Asset Management.