General Update – 16 March 2020

Through the Shadows – The current and the future after Coronavirus?

Further to our general Coronavirus related update last week, we write with our latest thoughts. The 24-hour news cycle announcing another sad death, speculation on further measures to delay the impact of the virus and the supermarket buying panic all compile to make it very difficult to see clearly what the future holds.

You will be aware of the significant stock market falls, and volatility which over the last week or so has been more pronounced than the financial crisis in 2008. Ordinarily, daily market changes typically range plus or minus 0-2%. Recently, we have seen daily market movements of up to +10% and -10% (S&P500), let alone values rising by up to +8%, yet falling back to +1% (FTSE 100) in the same day.

The Current

This leads to a deliberation on what actions should be taken, with three broad options:

• Sell down to reduce the risk.
• Consider the current market conditions as a buying opportunity.
• Maintain the current position.

A natural ‘instinctive’ reaction could be to sell down to remove the fear of further damage to your portfolio. However, this would make the paper losses actual and creates the need to attempt reinvestment based upon guessing future market timing.

Buying shares at the current market rate is certainly more favourable than say 1 year ago, however, we believe that the depths of the Coronavirus impact is still so uncertain that the market values could weaken further in the short term, before we see any sustained recovery.

Our current view is to maintain the current position. We recognise and accept that this stance may see further losses in the short term. The potential advantage is that you benefit from the recovery, whenever it arrives.

The Future

The combination of global government stimulus including further rounds of ‘Quantitative Easing’ and low interest rates, together with low oil prices brings the potential for a swift recovery in market prices. In the meantime, businesses will sadly go bust, and the human cost of Coronavirus is likely to worsen until it can be contained, let alone vaccinated against. The unanswerable question is how long that will take and how much our everyday lives will be disrupted.

We will continue to monitor the position and maintain contact as the situation develops. As always, please let me know if you would like to discuss your situation and requirements at any time.

Notes

Past performance is not a guarantee of future returns.