As investment markets continue to react to the escalating coronavirus pandemic, Tom Montagu-Pollock, Portfolio Director, and Caspar Rock, Chief Investment Officer, provide an update on our economic and market views and how we are managing investment portfolios through the volatility.
Recent stock market falls have exceeded those experienced in the past decade, including the Eurozone debt crisis of 2011 and the Chinese growth scare of 2015-2016. The week ending Friday 13 March ranked as one of the worst for global equity markets in over a decade.
The spread of the virus was already casting uncertainty over the outlook for economic growth and corporate earnings. The oil price fall is causing investors to reassess the prospects of companies and economies heavily exposed to oil production.
In response to the unfolding crisis, the Federal Reserve again cut US interest rates on 15 March. Its target rate is now 0.0%-0.25%. The US central bank also announced $700 billion of asset purchases, known as "quantitative easing" (QE), and a range of other supportive measures.
Heading into this year our portfolios had holdings in absolute return, gold and other alternative assets. These positions reflected our concern that equity markets were highly valued. This position has served portfolios well in recent weeks and protected clients’ from the worst of the equity market falls.
History has shown that trying to "time" market lows is a difficult exercise, and so we are taking an approach of incrementally adding to risk assets such as equities. Triggers that could lead us to increase our equity exposure could include:
The outbreak of the virus is impacting all of us. It has understandably caused market disruption, however, our clear commitment is that we will continue to put our clients’ interests first. We can say with conviction that we believe that the current situation will not affect our ability to manage client portfolios, and will enable us to continue providing you with the service you expect.
Please do get in touch if you do have any further questions. The Charities team are absolutely here to help and support you in these uncertain times.
The value of your investments and the income received from them can fall as well as rise. You may not get back the amount you invested.