Very suddenly, very clearly, we are living in unprecedented times.
The death toll from the Covid-19 pandemic is rising around the world and, as we write this on Thursday morning, it appears that London will shortly go into lockdown and be ‘sealed off’ from the rest of the country. The FTSE 100 index of leading shares, which started the year at 7,542, closed yesterday at 5,080 and is down 23% for the month to date. However, just because the FTSE 100 has fallen this much, does not mean your own portfolio has. You have a diversified portfolio, (includes bonds, cash, property and global equities, as well as UK-based equities) and is designed to meet your investment goals over the medium to long term.
In times like this, firms like ours can do one of two things. We can say nothing and hope for the best. Or we can communicate with our clients, give them the latest information and assure you that, whatever happens, we will still be here to answer your questions. We have decided on the second course of action.
We have already issued 4 client communications since the beginning of March 2020 and will continue to do so at regular intervals, to keep you informed.
Sometimes the news updates might not make pleasant reading: but we take the view that you would rather have regular contact from us and be told it as it is, rather than the message be sugar coated, or worse still, we don’t say anything at all.
The latest news
It hardly seems credible that the Budget speech was delivered little more than a week ago. It already seems like old news and on Tuesday, Chancellor Rishi Sunak unveiled a raft of new measures designed to support businesses and the economy as he repeated his promise of doing ‘whatever it takes’ to get the country through this crisis.
This week has also seen similar moves in the US, with the package there amounting to $1tn (£870bn at current exchange rates). The European Central Bank has also announced a €750bn (£700bn) set of proposals.
Domestically, schools will largely close from today and, as we mentioned in the introduction, it looks like London – the epicentre of the outbreak in the UK – will go into lockdown from this weekend.
The stock markets
It seems slightly ironic – given the source of the global pandemic – that the stock market which has fallen least this year is China’s Shanghai Composite index. As of yesterday, it was down by just 5% in March and by 11% for the year as a whole. Most major markets have seen falls of between 20% and 30% this month. The UK’s FTSE-100 index – at 5,080 – is down by 23% in March and 33% for the year as a whole. The US Dow Jones index is similarly down by 22% and 30%, closing yesterday at 19,899. Germany’s DAX index – which closed yesterday at 8,450 – has suffered a bigger fall, down 29% this month and 36% since the beginning of the year.
The biggest falls have been seen in the more volatile emerging markets. The ECB will clearly be worried about both Greece and Italy, with the Greek market down by 47% this year and Italy – the centre of the outbreak outside China – down by 36%.
It is also perhaps worth commenting on the pound, with headlines saying Pound crashes to 1980s levels. The pound is down by 10% against the dollar so far this month, and by 13% for the year as a whole: it closed last night at $1.1585.
We feel that now is a time for patience and to ignore a lot of the noise and craziness going around. For those who are invested for the medium to long term, you should hold your position and wait for the markets to recover, which they will undoubtably do at some stage.
To echo the Chancellor’s words on Tuesday afternoon, we will do whatever it takes – and a key part of that is being here to answer your questions and, if necessary, to look at your financial planning in light of the changing circumstances. If you want to review your financial plan and strategy to ensure it is still appropriate for your objectives, please get in touch.
Another reasonable question is, ‘how long will markets take to recover?’ Very clearly, we’re in uncharted waters. All economies will technically go into recession and – whatever action the Government takes – some previously profitable companies will go out of business. There is, however, an interesting article in the Economist this morning suggesting that some economies – it cites Singapore and South Korea as examples – could start to recover as early as the second half of this year. The short answer is that we do not know. But we’re certain that when this is over – as it will be – there will be a renewed spirit of optimism and a determination to rebuild as quickly as possible. This is when markets often rebound and move forward.
In the interim, we will keep our promise to update you on a regular basis. Many of you, our clients have been with us for a very long time. We have always kept you updated, and we will not let anything – not even a global pandemic – interrupt that.
If you have any questions at all – please just ask – We are here to help
* Please remember that past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested.
The source of the FTSE data is below.