Coronavirus - Market Update For clients and introducers Stuart Carswell Director Alex Brandreth Chief Investment Officer 18 th March 2020 Pareto Financial Planning is authorised and regulated by the Financial Conduct Authority
Contents • The impact of Coronavirus (COVID-19) • What has been the response from Governments • How has this impacted markets • How current moves compare to other historic market moves • Time in the market, not timing in the market
Background • The Coronavirus (or COVID-19) started in Wuhan, China in December 2019 • Wuhan is the capital of Hubei province – a landlocked province in the middle of China • The virus then spread across Asia and more recently in Europe • On Saturday 14 th March the World Health Organisation said that Europe is now the epicentre of the pandemic
The impact of COVID-19
The impact of COVID-19
The impact of COVID-19
The impact of COVID-19
COVID-19 – outlook for the UK Source: Financial Times; Containing coronavirus: lessons from Asia
How have Governments responded 23 rd January – Chinese government impose lockdowns in Wuhan and other cities • in Hubei province 28 th January – Hong Kong closes borders to mainland China • • Beginning February – South Korea increasing tracking of positive cases 27 th February – Japan announces school closures • 3 rd March – US Federal Reserve cuts interest rates by 0.5% • 9 th March – Italy announces restrictions over whole country • 11 th March – Bank of England cuts interest rates by 0.5% to 0.25% and announces • in the budget £5bn in emergency response fund to support NHS 14 th March – US imposes travel restrictions from Europe • 15 th March – US Federal Reserve cuts interest rates by 1% and re-starts • Quantitative Easing by $700bn 16 th March – Spain goes into lockdown • 16 th March – Germany closes the border it shares with five other countries. • 16 th March – UK government request for social distancing •
How markets have reacted - Equities Source: Alpha Terminal (Date: 31/12/2019 to 16/03/2020)
How share prices have reacted Source: Alpha Terminal (Date: 31/12/2019 to 16/03/2020)
How markets have reacted Bon onds / / Commoditie ies / / FX Source: Alpha Terminal (Date: 31/12/2019 to 16/03/2020)
Bull and Bear Markets
Time in the market, not timing in the market Source: Fidelity, ‘Understanding market volatility’, FTSE All Share
Investing for the long term Notes: Cash = ICE LIBOR – GBP 3 month; global equities = the MSCI World Index; US equities = S&P 500; UK equities = FTSE All-Share; inflation = Retail Price Index, (Jan 1987=100); global bonds = Bloomberg Barclays Global Aggregate; European equities = MSCI Europe; UK gilts = ICE BofA; UK gilt (local total return) emerging market equities = MSCI emerging markets; all shown gross of taxes and of fees and in GBP. Source: Vanguard, Bloomberg and Factset and Bank of England, as at 31 December 2019.
The Pareto Approach • We are helping to shape investment decisions for the long term. Short term market moves can make us feel uncomfortable, it’s important to not forget long term goals and objectives • We work with experienced investment professionals when investing our client assets • The overwhelming feedback from these firms is they are looking to take advantage of these current market conditions • In All Matters Financial it is important to stay calm and not make rash decisions. Particularly during these periods of stock market volatility • We are here to help and support you during these volatile times
A Typical Balanced Portfolio Passive Multi-Asset Fund Investment Manager UK Equity UK Equity 5% 8% International 15% 9% Equity 34% International Government 10% Equity Bonds 32% Corporate Bonds 10% Government Bonds Alternatives 45% 32% Corporate Cash Bonds Source: Brown Shipley and Vanguard (Life Strategy 60% Equity fund)
Conclusions • If the UK follows Italy’s path – expect more bad news in the short term. • However, stock markets have fallen considerably already and some sectors/companies that are more ‘at risk’ have demonstrated higher volatility. • The performance of safe havens asset highlight the importance of being well diversified. • Timing the market is very difficult – it’s time in the market which matters. • We are speaking with all our investment managers on a regular basis. • We are here to help and support you during these volatile times
Questions?
Information you need to be aware of The content of this presentation is for your general information and use only and is not intended to address your particular requirements. This article should not be relied upon in their entirety and shall not be deemed to be, or constitute, advice. Although endeavours have been made to provide accurate and timely information which has been obtained from sources believed to be reliable, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts. Levels and bases of, and reliefs from, taxation are subject to change and their value depends on the individual circumstances of the investor. The value of your investments and the income derived from them can go down as well as up and you may get back less than you invested or nothing at all. Past performance is not a reliable indicator of future results.
Recommend
More recommend
