The impact of Coronavirus on Financial Markets Part 3

Since the onset of the Coronavirus crisis in February, I have written to you at crucial times during the pandemic to keep you updated on financial matters and the impact that this is having on investment markets. With pubs and restaurants, salons and shops opening at the weekend, this feels like another important junction in this crisis and a good time to outline to you the impact that this is having on your finances.

To my surprise, and to the surprise of the majority of people that I talk to, the bounce in financial markets has been strong and, to this point, sustained. The sharp falls in markets in late February and March have largely now been reversed giving the indication of a V-shaped recovery. This is illustrated by the performance of the Atherton York Medium Risk Portfolio, please see below:

After a desperate March, this reversal of markets has placed many investors back where they were at the start of the year:

However, at this time we urge caution and expect further developments to unsettle markets. We feel that there are more downside risks at present than upside risks. We believe that investment markets are currently disconnected with what is happening in the real economy. Markets remain highly volatile and some of the daily swings in markets like FTSE 100 and S&P 500, are similar to those seen in 2008/9. Many indicators suggest that global trade will continue to contract into the third quarter of the year, before a slow and gradual recovery into 2021.

Despite this, our message and guidance remains unchanged. Investors are reminded of their need for discipline at this time – avoid the temptation to change your portfolio in response to short-term news. Investors should focus on their longer-term goals (the benefits of this long-term approach are clearly shown above). In putting together your portfolio, we have been incredibly cost-conscious and you can be assured that you are running a tight ship. The Atherton York Medium Risk Portfolio, for example, has over 24,500 underlying holdings, so you can be confident that you have the very highest levels of diversification possible.

Successful investing requires time and patience. This is as important now, as ever, as together we carefully navigate 2020. More information on the pandemic journey can be found here.