We wanted to note what the recent global developments has meant for the financial markets and your investments. See analysis below.
Market Movements and Outlook
We have seen recoveries in the markets in the past week or two, with big gains made in the stockmarkets last week following some renewed confidence as countries move through the coronavirus phases. It is certainly positive to see such a reaction and we hope this is an indication of the way investment portfolios can rebuild value over the coming months. As countries around the world relax lockdown restrictions, economies should begin to recover and we would expect markets to anticipate this improvement in sentiment, although the timescales for phasing out of lockdown and the eventual impact on economic growth is currently unclear.
We have also seen in the last couple of days an agreement between Saudi Arabia and Russia to reduce oil production. Although output will still be above current demand (due to the crisis, global oil demand is down around 35%), this should help stabilise oil prices and lead to a gradual increase, adding to portfolio value.
The recent correction has come after many years of strong market growth. I have included below the mixed-investment sector performance graphs to show the last 5 years and illustrate the longer term position:
(information gathered today using FE Analytics – 5 year and 1 month performance graphs shown and 10 year performance table shown – prices as of close of yesterday)
UT Mixed Investment 0-35% shares (blue) = Cautious to Moderate Risk
UT Mixed Investment 20-60% shares (red) = Moderate Risk
UT Mixed Investment 40-85% shares (black) = Moderate to Adventurous Risk
5 year performance chart
1 month performance chart
10 year performance table
As you can see from the table and graphs above, all these mixed-investment sector averages are showing growth over the past 5 years, even with the substantial losses in March.
Looking at the performance chart from the past month, the ‘Moderate to Adventurous’ sector is above the level of 1 month ago, with the other more cautious sectors not far behind.
Below is a table of the S&P 500 index (500 largest US stocks) biggest historical weekly drops, and the positions 6 months and 1 year after the weekly drops. Although each situation is different and this can’t be used as an accurate indication of how the current financial markets will perform, it is interesting to see historic ability to recover in a reasonably short period of time.
Our advice to clients is still generally to maintain their investments to ensure they benefit from the recovery when it happens. However, if you would like to discuss other options please let us know.
We understand that lots of businesses and income have been affected by the lockdown in this country, and as such you may need to access investment capital in case of emergency. While selling and withdrawing monies when markets are down is not normally advisable, we understand in some instances there may be no other option. You should also note the well-publicised government support in place, such as grants, subsidies and loans on favourable terms (borrowing can be very cost effective with interest rates so low).
If you need to discuss any of these options please feel free to contact us and we can provide information and advice.
Finally, we should note the fact that with markets priced at a low point, it provides an opportunity to add new investment at better value, a strategy which we are implementing for a number of clients. Capital can be injected into the markets now at the lower value, or drip fed in over a period of time.
If you would like further information or would like to discuss your portfolio and strategy further then please contact us via email to request a call.