I first started thinking about writing about COVID-19 and its impact on investment, about a month ago now. I was struck then, as I am now, about the enormity and far-reaching impact of this virus. Aside from the horrific loss of life and health on a global scale, economies are going into a state of suspended animation. They’re not shutting down entirely; online retailers, home deliveries, grocery stores and their suppliers are all experiencing a boom. The rest of us, the majority, are seeing orders cancelled or postponed, staff furloughed and expenditure reducing.
The situation has evolved so rapidly that I decided against publishing anything initially, for fear of being overtaken by events. Well, we’ve all been overtaken by events now, haven’t we? Many of my clients are asking questions about their investments; we’re all concerned. And many are confused, what to do? So, here are my thoughts.
If you’ve read my other blogs concerning financial news, you’ll probably have worked out what I’m going to say. “Hang on tight” is my recommendation right now, unless your particular circumstances mean you need to take other action, in which case “Talk to me first”.
So, here’s why.
Corona Virus Impact on Investment and the Global Economy
As the coronavirus spreads around the world, fears of its impact on the global economy have, in recent weeks, contributed to significant market movements. Human nature is such that, during periods of uncertainty, we start to doubt our investment strategy. It’s easy to be drawn into the endless cycle of bad news and make hasty investment decisions. This may be down to a desire to be decisive and do something or to limit your exposure to risk. However, unless your investment goals have changed, the best response to volatility is generally to do nothing in haste. Instead, focus on your long-term objectives.
Clearly, the outbreak of COVID-19 is a developing story and there is likely to be more volatility ahead. As I write, the USA has now become the epicentre of the pandemic. First China, now the USA and Europe. Its impact is everywhere. With this in mind, I’d like to take this chance to highlight my attitude to investing through difficult times.
- Market volatility is a normal part of investing and historical evidence suggests that, in the long-term, stock markets are likely to rise.
- Research shows that investors who trade in and out of the market can lose out. Between 1999 and 2019, the UK stock market returned an average growth of 4.8% a year, excluding investment fees. If you had missed the 10 best days over that period, your return would have been just 1.7%.
Of course, past performance is not indicative of future performance; each situation we face is unique.
Professional Investors and Fund Managers
- Our fund managers are professional investors. They don’t substantially change their process or portfolios in response to short-term volatility because it does not typically alter their long-term investment perspective.
- Our managers constantly monitor markets to make investment decisions that are in the long-term interests of our clients. Some of them believe the market losses have created buying opportunities.
- You can see frequent updates and reflections on the ongoing economic impact of the coronavirus at www.sjpinsights.co.uk. A good example is the Fund Manager Views Update of 26th March
COVID-19 and its impact on investment are clearly an evolving topic with no clear answers to the obvious question of ‘how will it end?’ Keep watching the news and checking articles from well-researched sources.
Please do get in touch if you have any queries and I would be happy to assist you.
** I’d like to credit my colleague, Jack Turner of RTW Wealth with much of the content for this opinion piece.