Please see below for analysis of what the recent global developments has meant for the financial markets.
If you have existing investments or pensions you should be reviewing how these are invested and performing at this stage. A properly managed investment portfolio should be able to limit losses in these volatile times and excel in the upturn. You should also be carefully assessing the amount of risk that you are taking with your investments and ensuring this is in line with your objectives and requirements.
Any person in a position to invest capital should also be assessing the opportunities available, as fund prices are low and there is greater value in new investments now.
If you would like a free consultation, including analysis of your current investments, please contact us to arrange a call with one of our advisers.
Market Movements and Outlook
Global stocks dropped sharply in March, with the coronavirus causing major economic disruption and a market sell-off, which was compounded by the Saudi/Russia oil production dispute and a resulting fall in oil prices. Nations have responded with extreme measures to limit the spread of the virus and prop-up the economy, providing financial packages to help support individuals and businesses. These actions have helped to buoy market sentiment and resulted in an uplift in the markets, with 10% global stock market growth on Tuesday and another positive day yesterday. It seems that once we get a handle on how to deal with the virus, we will potentially see a sharp recovery in the markets. There has also been more positive news from China, with the number of cases falling and some restrictions on movement being lifted. Also, while the situation in Italy is still critical, the daily increase in reported new cases appears to be decreasing, providing some hope that an end to this crisis is at least in sight. We will also have to wait to see if Saudi Arabia reduce their oil production, which will boost oil prices and inject more capital into investment portfolios.
A fund or investment portfolio is invested across a range of financial assets and sectors, not just in global equities which have seen the largest falls, therefore you should not be fully exposed to the larger drops and should have some protection. After such a dramatic fall, the outlook from fund managers is that we will see an investment recovery soon. Stock markets should start to recover over coming months ahead of any pick-up in economic activity, but it may take some time for them to regain the high levels seen during this February.
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 performance graph 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
As you can see from the table and graph above, all these mixed-investment sector averages are showing growth over the past 5 years, even with the substantial losses in the past month.
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.
If you would like further information or advice then please contact us via email to request a call.