CURRENT market conditions are and have been challenging, to say the least, for both investment professionals and their clients over the last month.
First with the coronavirus and then the oil price war between Russia and Saudi Arabia, the latter being the reason for the big fall on March 9.
Then again on March 12 when the US banned all flights from Europe, excluding the UK. Markets have now dropped in magnitudes not seen since 2008. Share price falls have been the largest amongst consumer-facing firms particularly within the leisure and tourist sectors as well as companies with higher debt relative to profits.
Governments and central banks are trying to help and will continue to do so. The Federal Reserve and the UK have already reduced interest rates with other central banks around the world likely to follow. Other forms of supportive monetary policy are also being rolled out into the financial system in order to ensure liquidity. Governments are planning to spend, using borrowed money, with even the Germans edging towards a bit of fiscal irresponsibility.
David Miller of Quilter Cheviot on 12th March said “Growth forecasts for this year have been revised but increasingly economists are forecasting weak activity beyond the current quarter, as quarantines and restrictions curtail activity.”
“The consensus remains for three to four months of depressed activity with a subsequent recovery but reduced activity will impact corporate profitability in the interim. Measures of stock market volatility are significantly higher than across 2019, as demonstrated with the main market movements reported widely across the media and press. This demonstrates the trouble markets are having in digesting news flow and assessing the risks ahead. The number of ‘unknowns’ means that assessing the direction of travel for markets from here is uncertain, but the continuing spread of cases and emerging stresses in the financial system would point towards continued volatility.”
What does this means for investors? Well we are all familiar with being told “The value of your investments can go down as well as up”, but it’s an emotive and indifferent statement that entirely overlooks the stressful emotional roller coaster that both investors and advisers feel when there is a major sell-off.
What I want to say to all of those clients/investors (myself included) is to sit tight, no matter how scary that is, any knee jerk reaction i.e. selling in a falling market would just mean consolidating a heavy loss and missing the rebound, when it comes. You have invested for the medium to long term, which means the more likely you are to have the potential for healthy returns and achieve your financial goals, regardless of market downturns.
Blacktower have been advising clients for over 30 years now, through both the good and bad times and our role is to utilise that experience in dealing with different types of market conditions, to make sense of the current situation, to be there to reassure clients and help take the emotion out of clients’ decisions. Blacktower will be by your side both now and in the future, we are here to help you weather the stormy waters ahead.
The above information was correct at the time of preparation and does not constitute investment advice and you should seek advice from a professional adviser before embarking on any financial planning activity.
Blacktower Financial Management Ltd is authorised and regulated in the UK by the Financial Conduct Authority and is registered with both the DGS and CNMV. Blacktower Financial Management (Int) Ltd is licensed in Gibraltar by the Financial Services Commission (FSC) and is registered with both the DGS and CNMV in Spain.