As investors it is important to keep calm. Whilst it is natural to be concerned by what is happening in financial markets as portfolio values are falling, it is important to remember that we are long term investors, so we must not let events over the next year distract us from our objectives that are framed over the coming ten or twenty years.
Stock markets have crashed. Corporate bonds markets have slumped. The gold and oil price have fallen. Sterling has dropped to a 30-year low. Even government bond markets have sold off heavily over the last week as governments began to absorb the huge costs of fighting Covid-19. At times like this, with all asset classes suffering at the same time, even a diversified portfolio offers little respite over the short term. However, we do believe, that as matters stabilise it will be those invested in diversified portfolios who are best placed to take part in what may be a bumpy recovery.
Markets are moving incredibly quickly. The moves of 5% or even 10% on a daily basis in equity markets are like nothing we have experienced in our lives. Some investors are panicking, others are stretched and forced to sell. Typically, these are the conditions when bargains are to be found. Whilst it is always difficult, if not impossible, to accurately call the bottom of the market, we do believe that a recovery will take place. The timing of this is highly dependent on the direction that the fight against Covid-19 takes and whether any other problems arise. The one thing we can be sure of, however, is that any investors who sell to cash now will almost certainly miss out on the recovery when it comes.
The current situation is worrying and very trying. However, we must take advantage of our long-term investment horizons and look through the uncertainties that we face over the coming months. We are hopeful that many of our current concerns will be firmly behind us in a relatively short period of time. Markets today are now discounting a great deal of the worst possible outcome and the steps that governments and central banks around the world are taking should support companies and industries until such time as the disease is dealt with and economies can begin to return to normal.
As a result of Covid-19 Dentons Wealth have implemented a ‘limited office access’ policy and the majority of staff are now working remotely. Although we will continue to have full access to our systems, this may result in a delay to our normal response times. Our aim is to protect our staff whilst continuing to provide a full service to the best of our ability.