With the increasing spread of the coronavirus COVID-19 across the world, the economic impact is being sharply felt in investment markets. Over recent days this has been further exacerbated by Russia and Saudi Arabia waging an oil price war, causing the price of oil to plummet this week.
There is huge uncertainty and no small degree of short-term panic in many investment markets at present as investors try to grapple with the potential economic impacts of these unknown and unpredictable factors. It is clear that the actions being taken by governments and health authorities will cause both a significant demand and a supply shock to the economy in the near-term. Supply chains are being disrupted by lock-down and isolation measures being enforced in various countries and demand is being hit as consumers and businesses batten down the hatches and reduce spending. One hopes that the measures being implemented globally will help stabilise the situation in time (as now appears to start to be the case in China, the original source of the virus) and therefore supply and demand will return to some sort of normality in due course. What is not clear is how long this will take to play out and how many casualties will fall in the meantime.
However central banks and governments are taking action to try and help counter the economic impact as they can. Interest rates have been reduced and fiscal stimulus packages have been announced which will help individuals and businesses to get through these difficult times.
Clearly this is a worrying time for us all both from a humanitarian and financial perspective. However, as ever we would urge clients not to panic into making misguided short-term decisions when considering their longer-term investments and financial plans. Whilst the longest bull-market for shares on record has just ended and we enter a “bear market” (where equities fall by more than 20%), there will come a time when markets stabilise and start to look forward again, supported by still incredibly stimulative monetary policy. Calling “the bottom” of any decline in markets is an impossible task and looking to make short-term timed investment decisions is therefore equally difficult. In time markets and portfolios will recover their value and in the meantime should continue to generate income to help set against some of these capital falls.
Clients should be aware that financial firms such as SG Wealth have a regulatory duty to inform clients when their investment portfolios fall by more than 10% from a previous reporting period and we, like most of our peers, have had to send some notifications of this type to our more adventurously invested clients. This should not be seen as a trigger to take action, but to be aware that your portfolio is experiencing volatility – a common trait of long-term investment. Should you receive any notifications, please of course discuss any questions you have with your Wealth Manager, but rest assured we are keeping a close eye on all our client’s investments and looking to manage them as best we can in these difficult conditions. Our discretionary investment powers and the active approach to investment within funds we hold offers the opportunity for us to re-position portfolios as we see the situation develop.
We urge our clients to stay safe at this time, take sensible personal welfare precautions and of course let us know if you have any financial questions you wish to discuss. In coming days, as well as keeping you abreast with any further thoughts on investment markets, we will be sending you our update on the Budget and what it could mean for your personal finances.