Market Update – 7th April 2020.

Yesterday’s upbeat mood in global equity markets has continued into today on signs that the spread of the coronavirus is slowing.

While US deaths have unfortunately passed 10,000, the New York Governor, Andrew Cuomo, said fatalities were showing indications of hitting a plateau, while key European hotspots continue to report that new cases were slowing.  There was also good news from Austria as they plan to start lifting (albeit slowly) the lockdown restrictions and re-open its economy.

The FTSE-100 which ended yesterday up 166 points or 3.08%, is, as we write, up a further 120 points or 2.15%.

Although the FTSE-100 is still down over 1,800 points or nearly 25% since the start of the year, the index has now recovered just over 800 points, or 16%, from its intraday low on 16 March 2020 – which clearly illustrates our previous statement (please see here) that it is best to resist the urge for any rash, knee-jerk reactions and instead look past the negative news headlines and maintain a long-term perspective, as time in the market is much more important than trying to time the market.

We have also repeated many times in these updates that equity markets hate uncertainty (and the coronavirus outbreak is a big uncertainty) – and so with the spread of the coronavirus now appearing to be under control, equity markets can now start to focus on the light at the end of the tunnel.

Although the economic impact from the coronavirus outbreak will be negative, we believe it will also be short-lived.  Once lockdowns start to be lifted we should start to see a V-shaped economic recovery, rather than a prolonged and deep downturn, given the stimulus measures that governments and central banks have provided.

Consequently, as we said on 31 March (please see here), we should experience something similar to that of the global financial crisis in 2008/9, when global equity markets rose even though the global economy was still contracting.

As this is the start of the new tax year, we have had a number of clients asking if they should be taking advantage of their £20,000 ISA allowance by adding to their portfolio.  From a market perspective now could be a good time to act, however you should always speak with your Adviser first to ensure that it is personally suitable to you and you can do this using the details found in your email.

While we aren’t expecting it to be plain sailing from here on – until there is some resemblance of normality in our lives we fully expect the current unpleasant market volatility to continue.  Interestingly, according to data from Bloomberg, there were 1,129 daily swings in excess of 2.5% in US equities over a 120 year period between January 1900 and 24 February 2020 (i.e. just 3.5% of all trading days saw a move of +/-2.5%).  However, in the 31 trading days between 24 February 2020 and last night (6 April 2020) there were 23 moves of +/-2.5% (i.e. 74% of the trading days).

However, our risk management processes mean that we drip-feed clients’ new investments into the market typically over a three-month period.  We believe this drip-feeding approach is beneficial for clients as it gives the Investment Team the flexibility to recognise and be proactive to changing market opportunities by speeding up or slowing down the level of investment and it can lessen the risk of a client investing a large amount in one day at the wrong time.

If you would like to add to your portfolio and utilise your £20,000 ISA allowance, please contact us using the details found in your email to start the process.

Investment Management Team

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