As we head into what will no doubt be a very different bank holiday weekend for us all, I wanted to take the time to write and remind you that you are not alone.
The current pandemic has caused significant disruption to business operations and a significant increase in economic uncertainty, with more volatile asset prices and currency exchange rates, and a marked decline in long-term interest rates in developed economies.
Through all of this, we have been keeping a close eye on the market downturn. Our Chief Investment Officer, Alex Brandreth now releases a weekly market update which I hope you have found of use. If you haven’t seen these yet, they can be found in the Insight section of our website.
Regarding the drivers of the market downturn itself, a lot has already been said. This is very much a global issue. A deep recession can be expected with high unemployment and poor economic data ahead. To offset this, a strong policy response, fiscal and monetary, is now in play.
The pattern of big up days and big down days is upon us, but it is not the sign of a broken market—it is very typical of what happens when investors are unnerved. We have every reason to believe it won’t last forever. Historically, markets have always bounced back. Stocks have outperformed cash in every 20-year period across history (using U.S. data since 1871) so holding stocks through crises has been rewarded in the past.
The position we are taking at this time is:
Stay focused on your goals. We have a financial plan in place to help you achieve what is important to you. If you’d like us to review your projections and planning, please get in touch. This will help you to stick to the plan. Please remember that downturns are part of the journey to achieving those goals.
Don’t try to pick the exact bottom of the market. Markets don’t work this way, because the market turns well before the economy turns. From all our analysis and knowledge, we believe the best approach is to phase our buying while everyone else is selling.
Zoom out. Timeframe is important. We say time in the market, not timing in the market. Remember we will get through this, even if it isn’t a straight-line recovery, and we are here to answer questions about any concerns you may have.
I also wanted to alert you that a major event like Coronavirus can initiate an increase in scam activity. When it comes to financial services, the scam activity is more nuanced and often appears after the initial shock of a major event. With that in mind, we are urging you to be vigilant for scams that could appear over the coming months. For full details on what to look out for and how to protect yourself please visit the FCA website.
If you have any questions, please contact us. Pareto remains fully operational and here to support you. We may not be in the office, but we have full access to remote working technology and secure access to the applications, tools and data needed to deliver business as usual.
John Stevenson, Managing Director