What’s the Impact of the Market Downturn on my Investment Portfolio?

In the early days of lockdown, most people we spoke to told us their main concern was staying safe and well.

Seven weeks in. We’ve adapted to our ‘new normal’ and some of the anxiety caused by the pandemic is starting to fade.

Now, we’re finding people want to understand the impact of the stock market downturn on their investments.

Here’s some thoughts from our Investment Director, Michael Carden:

What help can we expect from Government?

We’re all aware that most developed nations are providing enormous central bank and government stimulus to support businesses, citizens and economies. An eye watering $2 trillion (so far) in the case of the US.

It doesn’t take an expert to realise that we will continue to see stock market volatility as bad and (hopefully) good news emerges, and the global economy grinds back into life.

As always, stock markets look to the long term, and signs are that they see a return to normality over a 1 to 2-year time frame.

Globalisation of supply chains and production has been a theme of recent decades. In the UK we’ve seen manufacturers moving some of their production to regions of the world with cheaper labour. The car industry has been at the fore-front of this with ‘just-in-time’ supply chains.

President Trump originally kicked off the global trade tariff war by placing ‘America First’ and encouraging US companies to bring manufacturing back to the US.

When this current crisis is over, many governments and businesses will be carefully reassessing their supply chains. They’ll want to know how they can be made more resilient in times of disruption. Inevitably this will include medical supplies including PPE , Drugs, and research.

What does this mean for your investments?

Some of the large losses in stock markets in March have since recovered but we should expect to see continued volatility for some time yet.

Uncertainty is always bad for investors. There will inevitably be gloomy news to come for falls in GDP. But the road back to more normal economic activity is starting to become clearer.

History over the last century has shown that, in the main, large falls have often been followed rapidly by large recoveries. We have seen that to some extent in the last month, as investors reassess the long-term view.

Given a medium-term time frame (typically 2 to 5 years) there’s confidence that the global economy should recover. So should stock markets since they effectively represent the same thing.

The strategy of investing for the medium to long term and diversifying over many holdings, regions and asset classes has been paying off during these uncertain times.

Diversification means our portfolios include fixed interest funds, considered ‘boring’ when stock markets were rising.

However, many of these funds have benefited from the recent uncertainties.

Yes, of course values have fallen since the highs at the start of the year. But in our portfolios by no means the dramatic headlines of 20% and 30% the press love to get excited about.

Check. Have you got a well diversified portfolio? Is it money you’ve set aside for the medium to long term? If so, holding tight rather than selling is likely to be the better decision.

But if you’re worrying, please don’t let it cause you sleepless nights. Call your adviser and talk through your concerns.

And if you don’t have an adviser, why not contact us to schedule a free call? Just complete the contact form.

Risk Warnings: This is our opinion, not advice. As with all investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you invest.

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Risk Warnings

This article and the information on this website is not personal advice. It’s only intended to give you a brief summary or highlight a particular issue for you to investigate further. It is based on our current understanding of legislation and HMRC guidance which can change and is correct as of the date of the post.

If you’re in any doubt whether a particular course of action is suitable for your circumstances, you should seek professional advice. Tax rules can change and any benefits depend on individual circumstances. And, if you are unsure any reliefs are applicable to you, you should consult your accountant or HMRC.

The value of investments and any income from them can fall as well as rise, so you could get back less that you put in. Past performance is not a guide to the future. It cannot provide a guarantee of the future returns of a fund.

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