We just wanted to let all our clients know that, in light of the 3 week extension to the lockdown, we will continue to provide our full services. In these difficult times, we appreciate the efforts clients have made to meet with us by tele/video conference and we hope that you haven’t found things too disruptive in terms of service levels.
We have also found investment houses and life assurance companies are upgrading their ability to work remotely and this is proving to be helpful with new applications and maintaining service standards.
Although health is our primary concern, we understand many clients will be experiencing difficulties in business and employment and we are focused on helping our clients meet their financial planning objectives and managing their investment/pension portfolios.
In these unprecedented times, markets have responded positively in recent weeks which has indicated there may be some stability in the market. We wanted to address some key issues which may be on our clients’ minds and are certainly at the forefront of ours.
Is the recent recovery part of a sustained recovery? It is well known that global stock markets do not like uncertainty and the COVID-19 pandemic has certainly caused uncertainty. The significant falls of March have to an extent been reversed and this is, we believe, largely due to the economic stimulus provided by Governments all around the world, albeit the EU are finding it difficult to confirm their plans. Markets have also accepted the crisis may have been reasonably well managed and countries such as China and South Korea are starting to reboot their economies.
As to whether this recovery will be sustained will depend upon the market perception of how well the USA does to get on top of the crisis and from there, how quickly it returns to normal working patterns.
Is this a good time to make new investments? Generally, when there is so much uncertainty, our advice has always been to stay on the side-lines. In fact, if we are in a bear market, the recent rise may be, what is termed a “bear market trap” whereby the market rises to lure in new investors only to fall at a later date. Trying to use some logic, one thing we can say, is prices have reverted to levels previously seen about 3 years ago and, if new money comes in, we would prefer to buy at these prices rather than those in January of this year.
What are the longer term consequences? It looks as if countries are getting on top of the crisis and when this happens markets usually respond quickly. What is possibly of more interest is the economic lag the lockdown has caused. We now face a global recession but the depth and length of the recession will be key. Market analysts that we follow indicate it is more likely to be short and not to the same extent as a depression. We think this is likely to be correct due to pent up demand and government stimulus. The economic downturn will have affected companies’ earning potential and how quickly companies can recover will be the long term test of how markets respond.
At Landmark, we try to follow sound investment principles and those haven’t changed in the current climate. They include diversification of assets, assessment of income and careful risk management relating to clients’ financial plans. This is what we term the “consequential risk” of investment portfolios affecting the financial plan and in turn lifestyle outcomes. We cannot, of course, predict the movement of markets although many try but what history teaches us in a capitalist society, is markets do recover as advances in technology and standards of living drive up our economic prosperity.
Our advice for existing portfolios is, as always, to remain invested. For new monies, there is potential to invest at a time when markets have moved back to prices experienced 2-3 years ago.
If you would like to discuss any points in this update, please feel free to contact us.