Market Update – 25th March 2020

Sentiment improved yesterday as the Democrats reached an agreement with Donald Trump on a $2tr fiscal stimulus package to help the US economy (the world’s largest economy), get through the coronavirus outbreak.

As a result, the Dow Jones closed over 2,100 points higher, or 11.36%, last night (its biggest one-day percentage gain since 1933), while the S&P 500 climbed 9.38% – the most since October 2008.

Elsewhere, the FTSE-100, which ended yesterday up just over 9%, is, as we write, up another 200 points or 3.7% at 5,646. Likewise, Asia has closed up strongly this morning – for example, Japan’s Topix index closed up 6.87%.

This stimulus package and subsequent global equity market rebound confirms our previous views that we have shared with you, that global economic growth and company profits will only be temporarily impaired – i.e. the economic shock should be short and sharp, followed by an economic recovery towards the end of the year, rather than a severe and protracted global downturn.

This rebound also confirms our “time in the market is more important than trying to time the market” mantra (please see here) – as there is a high probability that those trying to time the market would have missed yesterday’s strong rebound given the highly negative sentiment on Monday, when the FTSE-100 closed below 5,000 for the first time since 2011.

However, we aren’t saying the worse is finally over as one day doesn’t make a trend.  We have also lived through enough crises to know that we often have false starts, and we learnt from the global financial crisis in 2008/9 that we needed several stimulus packages before confidence fully returned.  However, this stimulus package has hopefully put a floor under the equity markets and consequently, we are probably at the end of the beginning, rather than the beginning of the end.  As such, we fully expect market volatility will remain elevated in the short term as we need to see a slowing in the spread of the coronavirus outbreak and lockdowns to be lifted for the current fears to fully dissipate.

We would also like to reiterate that our long-term growth portfolios are invested in a diversified selection of companies and funds across a variety of asset classes (equities, fixed interest and cash) and geographies, such as Europe, Asia and the US, which can survive periods of crisis such as this – and although their prices have been impacted by the recent indiscriminate and emotionally-driven sell-off, they have started to recover along with global equity markets.

We would like to end today’s market update by saying that we hope you and your family and friends are safe and healthy, and remain so, during this horrible and difficult coronavirus lockdown.  Furthermore, while we appreciate that the current equity market volatility may be unnerving and unpleasant, we want you to know that we are doing everything we can to ensure you are kept fully up to date.

All hands continue to be on deck here at my wealth – and as other companies retrench and go silent, we are continuing to invest in new efforts to serve you better.

Consequently, please rest assured that during these unprecedented times, we will continue managing your savings and delivering these daily market updates as we believe that at this time they are more valuable than ever.

Our Investment Team can, and will start working remotely with systems that will allow them to seamlessly continue to manage your savings as they will have exactly the same functionality and real-time price, news and market information that they have now, here in the office.

We also appreciate that you may have questions or issues regarding your portfolio, and we want you to know we are ready to help and serve you.  We have always prided ourselves on providing excellent customer service, and in order to continue to do this during these unprecedented times, we have expanded our capacity to answer calls and field questions remotely.  As a result, if you have any questions, please do not hesitate to contact us.

Investment Management Team