How does a Pandemic impact on investments?

At the time of writing there have been drops in some investment markets of up to 10% in the past week. On one hand the largest drop since the late 1980s or, in other words, back to values last seen two years ago. However, it depends on exactly what you are looking at and in which part of the world.

Share Dealing

Share dealing has of course changed in recent years and automated systems have been developed to smooth out panic buying and selling by individuals. It had been suggested that 2020 was going to be a year of recovery, but Coronavirus has taken confidence out of some markets.

In any market upheaval that there will always be winners and losers, for example, oil prices may reduce if travel is limited by reducing unfettered transport. Companies that make or handle hygiene products could benefit. Better information on the virus, media hysteria and negative sentiment can cause upsets that may be a threat or an opportunity. It is also likely that later in the year warm weather could result in a fading of the effect.

Property

Of the four main categories of investing Property might be a bystander, although home working might impact on future working practices. Equity markets could rise and fall thus creating buying and selling opportunities. There could be credit or recessionary risks which could impact on cash and associated interest rates. Many investors will gravitate towards Government Stocks or Gold if they are not confident in equities, for example.

Fixed Interest

The Fixed Interest sector was generally regarded as being overpriced before Coronavirus. This may have extended the attractiveness of the sector, but it remains a sector to keep a close watch on. Making predictions about how things may play out can be dangerous and the message needs to be that investments should be viewed as long term and not short term. If an investment has been set up for medium to long term, hold your nerve because a temporary drop in value results in a ‘paper loss’ rather than a real one. To exit an investment when it has reduced in value crystallises the loss. If you can hold your nerve, a recovery will follow (if history is to teach us anything).

Managed Investment

Well managed investment funds are aimed at long term benefits and a drip fed investment can provide an opportunities to buy investments when they are low and benefit from the recovery. Regular savings plans can also smooth out the volatility that is associated with equity-based investments. Cash deposits by contrast may offer a high degree of security but there is little optimism for higher interest rates currently.

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If you need clarity for your investments and/or pension funds, contact us at Brooks Wealth for a free initial consultation.

Author: Eamonn Dorling Dip PFS, Senior Independent Financial Adviser, Brooks Wealth Management