It’s easy to feel demoralised about your financial situation in the current environment, dominated as it is by bad news of rapidly rising deaths and decreasing portfolio values. Obviously the former is the real tragedy in all this however, it’s natural for us to worry about our future finances as the economic fallout of the crisis is constantly shoved under our noses by the media, who excel at highlighting the negatives in a crisis.
With that in mind, our investment management partner, Tilney, have produced a reassuring list of nine positive thoughts and actions to reassure investors at this tricky time. We hope that by sharing their words of wisdom with you, you will see that there is no need to panic and, while we are by no means belittling the pandemic, or its economic impact, we can look forward to more positive times ahead.
Here are Tilney’s nine key messages to bolster you in the face of Covid-19:
- Tilney is adaptable and robust
- Infinity clients who invest their portfolios via Tilney can take reassurance from the fact that the company has had disaster-planning measures in place for many years and have the technology in place to continue to support clients during the outbreak.
- This crisis will be temporary
- Now we are in the thick of it, with many of us living in confinement and our freedom curtailed, it can feel that this is a never-ending new normal. But it isn’t. And just as we will regain our freedom and be able to go out once again, economies and markets will recover. Yes, we are facing a major health threat, yes, forward-looking stock markets have fallen with the expectation of a global recession and yes, there is widespread economic disruption but Tilney still predict signs of an economic recovery in the second half of the year and believe that markets are likely to pre-empt this.
- Tilney portfolio’s are inherently defensive
- No investor or investment manager, however experienced and skilled, has escaped the indiscriminate slide in stock markets. Everyone who owns stocks is a loser right now. However some have fared better than others and Tilney portfolios, which are invested across multiple asset classes, not just equities, have been cushioned to a degree against the slide. Above all, Tilney warn – as have we – against panic selling and crystallising paper losses. It really is the worst thing you could do right now.
- Don’t forget your actual investment time horizon
- You may well have many years in front of you before you need to access your investments so it doesn’t make sense to focus too much on the here and now impact of the pandemic on your portfolio. Trust the process and keep focussed on the long term.
- Trading heavily now is a bad idea
- Market volatility is off the scale at the moment. It may surprise you to know that equity markets have had some of their best days ever in recent weeks even while the pandemic is in full swing. The day to day fluctuations are reactions to the constant flow of news about the virus, how health authorities are responding to the crisis and aid measures being announced by governments and central banks. We are likely to see this volatility continue over the coming weeks and months. Trying to aggressively trade in this environment is to be discouraged because the risk of mistiming is greatly increased.
- The policy backdrop is now extremely supportive
- Just as governments have introduced policies to contain the spread of the virus, they have been announcing so-called ‘shock and awe’ stimulus packages to keep businesses afloat and people in employment. The aim is to limit long term economic damage and aid recovery. Examples include the lowering of the interest rate in the US and the UK to the lowest levels ever and the UK government underwriting 80% of salaries to prevent job losses.
- According to Tilney ‘The combination of ultra-low interest rates, massive spending commitments and temporary tax reliefs by governments, as well as very cheap oil prices which put more cash in the pockets of consumers, provides a very powerful set of conditions for both the economic recovery phase and for the turn in financial markets.’
- Bear markets are a great time to invest
- A bear market is defined as a market which has declined by more than 20% and Covid-19 has triggered one. As we have pointed out in a previous post, the current conditions provide investors with liquid assets with a golden opportunity to invest. While not everyone will be in a position to take advantage of this opportunity, if you are, go for it but with the same investing provisos as usual – keep your portfolio diversified and adapted to your tolerance to risk. Also….
- Don’t try to call short-term market movements
- If you’re looking to invest now, a good strategy is to feed new monies in over the coming weeks. As outlined above, volatility is at its height right now and it’s even more impossible than usual to time the markets. Spreading purchases over several weeks will mitigate risk.
- Confidence is what we are all waiting for
- Confidence is the missing ingredient for markets to take an upward turn. With governments putting protective measures in place, it’s only a matter of time before it resurfaces. Key moments will be a clear sign that the spread of the virus has been halted in the developed world and a decisive breakthrough in treatment – maybe even the holy grail of a vaccine – and these events will trigger a reversal in fortune for markets around the world. China, which is the first country to tread the path through infection, spread, lockdown and a halt in infection rates has been the best performing market year-to-date, which speaks volumes and gives cautious grounds for optimism.
These are not easy times for investors but things will get easier. We hope that you find the nine points above reason for optimism and that you will feel reassured that your financial future will be just fine if you keep calm and carry on.
A leading provider of expat financial services and wealth management services across Asia.