The FTSE 100 suffered its biggest one day loss since 1987 on Thursday following ongoing Coronavirus concerns. Clients have seen their portfolio’s lose value since the beginning of March – what considerations should we all be making following this short term volatility?
Data tells us that if you look historically at epidemics and stock market performance then the market does tend to overreact in the short term. Since 1980, there have been 12 major incidents (HIV, SARS, Swine Flu, Bird Flu, Zika etc) and if you use the S&P 500 (a US stock market similar to our own FTSE 100) as a marker then 6 months later the market was higher in 11 of the 12 cases with an average price return of 8.8%. 12 months later the S&P was higher in 9 of the 12 cases with an average return of 13.6%. However, this outbreak is of course different, the outcomes are unknown and it has come at a time when many markets had been richly valued.
Mix this up with Brexit, oil concerns and US / China trade spats, uncertainty in markets will likely continue for the foreseeable future. To what degree, of course, we do not know.
Clients should be considering these matters in line with their own portfolios alongside their short and long term investment goals:
- What are my timescales to realise capital? Income? Tax free cash?
- What cash reserves do I have to support me through such periods?
- How regularly have I been reviewing my portfolio?
Clients will be aware that we have been increasing the diversity of their portfolio’s steadily over the last 2 years to combat ongoing market volatility. We are confident this approach adds even more relevance and value in the last 2 weeks.
Whilst it is disappointing to see strong portfolio growth disappear quickly over the last couple of weeks we remain confident that the current approach adapted to our range of clients remains suitable and valid even in this concerning, unknown period of time.
Our thought process currently is to sit tight. We appreciate it doesn’t sound as though it is the most pro-active but it guarantees two things:
- Your portfolio’s will not be relinquished at the very worst time.
- You will be fully invested in your portfolio’s at the very best time.
Stuart and Jack are available any time to discuss any concerns you may have.