A Message for our Clients
Friday March 20th, 2020
Markets have been a bit like a ski slope. When the downhill becomes too steep you wonder why you ever became involved. When it starts to level out and you are at the ski lift back to the top, you remember why. When you are sat in the bar later remembering the worst of it, it becomes a story you enjoy reliving on how you survived.
So are we still looking downhill? Some markets seem to have hit a floor and optimism around the bad news being fully in the markets, means that a recovery is now possible. No one is suggesting it has started but we are moving from looking downhill to levelling out.
The continued spread of coronavirus and the wide-scale quarantining across the world has led to fear over reduced global demand and disruption of supply chains. The impact of this was compounded by disagreements last week between OPEC members, leading to the oil price falling from $60 a barrel at the start of the year to around $30 today.
Equity markets have fallen dramatically in response to these events and, for the most part, indiscriminately. Some sectors have been hit harder than others, such as energy and smaller companies, which have led the sell offs. In addition, those companies with complex supply chains and businesses reliant on discretionary consumer spending.
It has become clear that the impact of the virus is likely to be with us at least for the medium term and, in response, consumers are likely to save rather than spend in the face of adversity and uncertainty. The concern for investors is that this develops from a health crisis to a liquidity crisis and beyond.
We all know that markets fear uncertainty and the global economic impact and the threat of recession is an unknown. However, what is becoming clearer is that we are beginning to witness a sustained and coordinated response from governments and central banks, such as the Bank of England and the Federal Reserve in the US, with fiscal packages and a cut in interest rates. We anticipate that this will support markets to help create a levelling out.
Whilst this current situation is undoubtedly worrying over the short term, I continue to believe in investing for the long-term and the prospects of your portfolio. As an advice firm we would urge caution and restraint in these volatile conditions and do not recommend any change to the investment strategy that we previously agreed, in light of recent events. You are investing in line with your risk profile and time horizon and, as such, we would recommend that you remain invested in accordance with this, rather than to sell out, realising losses.
The question as to whether to buy into the equity market comes down to the question “have we reached the floor for values?” Some clients will be happy now to start to add equity exposure.
For now the experts are not 100% convinced that this point has been reached. However, Equities are looking good value and starting to lean towards a value asset over the coming days, weeks and months, might mean more risk and volatility but will also ultimately give more growth potential on the recovery.
We will be looking at all client’s portfolios over the next few weeks and making suggestions on asset allocation options where appropriate to risk, capacity for loss and time horizons. For now we advise that we all trust the investment fund and portfolio managers to take reasonable steps on our behalf
A reminder of the risks
We will always do our best to meet your expectations when we are investing your money, but please remember the value of an investment can go down as well as up and time in the market will help smooth out returns.
We’re here to help
If you’d like to speak to us about your investments, please call us on 01733 314553 or email firstname.lastname@example.org and we’ll try to help in any way we can.