Market Update March 2020: Markets Bounce Back Responding to US Stimulus Package
The FTSE 100 soared yesterday as it recorded its biggest one-day rise since 2008, and the second biggest one-day rise ever, climbing 9.1% as US lawmakers agreed a stimulus package worth $2 trn. It wasn’t just the UK market that responded positively as The Dow Jones Industrial Average rose 11.4% – its biggest one-day gain since 1933, while Japan’s Nikkei 225 index soared 7%, its largest daily rise in four years.
As the momentum has spilled over to today with the FTSE 100 looking like it may close in positive territory for the third consecutive day, we wait and see whether this sudden optimism across global indices turns out to be a “bear-trap” or “bounce” from the bottom. If one thing is for sure, it is that the economic data that is emerging highlights the need for such dramatic support for the US and global economy.
The UK PMI data released on Monday highlighted how the COVID-19 outbreak has already dealt the UK economy an initial blow even greater than that seen at the height of the global financial crisis. With additional measures to contain the spread of the virus expected to further paralyse large parts of the economy in the coming months, caution may well be the order of the day as government stimulus and the economic reality of the situation battle for the upper hand.
At Vizion Wealth, we believe in the tried and tested “time in the market” rather than “timing the market” using risk rated multi asset portfolios. As such we have maintained our positioning throughout the development of the global pandemic. As can be seen shown in a recent study by HSBC, missing out on the top 5 days of developed stock market returns can severely reduce overall return over the long term.
Whilst our multi asset approach and preference for utilising highly reputable active fund managers has resulted in a degree of downside protection, we acknowledge that the impact of the Covid-19 outbreak will inevitably cause casualties and less financially secure businesses are likely to suffer or close. Over the last week, our Investment Committee have been thoroughly reviewing our portfolios to understand in finer detail all of our fixed interest credit risk and exposure to smaller companies that may be hardest hit from these adverse market conditions.
Our exposure to lower graded fixed interest debt is minimal with the majority in all portfolios being investment grade. Our equity spread also offers long term stability with overall exposure being focussed on Giant, Large and Mid-cap companies.
Our overall view on equity exposure remains the same as there is significant value in equities after recent market falls. This is demonstrated in the composite contrarian indicator chart below showing an extreme oversold position in equity markets. This is not to say we will not see further volatility but for long term investors, this is likely to represent an attractive opportunity.
The economic recovery will be largely dependent on quality businesses with strong balance sheets eventually emerging stronger and more competitive. At present, fund managers appear to be taking the same view and are being very selective in the stocks that they are purchasing.
We have been tweaking our model portfolios to take account of the current market conditions although we are comfortable our current portfolios have a well-constructed asset spread and diversification to weather the crisis and bounce back strongly when the recovery begins. We will continue to keep you informed of our thoughts and portfolio positioning as the situation develops.
As a business that offers personalised advice to our clients, we appreciate that all of your circumstances are different and the most important thing is we are there to guide you through this crisis and to ensure your strategy remains on track. For this reason, we welcome phone or conference calls to discuss your concerns, thoughts and long-term strategies. All staff including our advisers Andrew and James are now working from home, although we are able to continue providing the same level of service over the telephone, via screen share over the internet or via email.
Stay indoors and stay safe.
Who are Vizion Wealth?
Our approach to financial planning is simple, our clients are our number one priority and we ensure all our advice, strategies and services are tailored to the specific individual to best meet their longer term financial goals and aspirations. We understand that everyone is unique. We understand that wealth means different things to different people and each client will require a different strategy to build wealth, use and enjoy it during their lifetimes and to protect it for family and loved ones in the future.
All of us at Vizion Wealth are committed to our client’s financial success and would like to have an opportunity to review your individual wealth goals. To find out more, get in touch with us – we very much look forward to hearing from you.
The information contained in this article is intended solely for information purposes only and does not constitute advice. While every attempt has been made to ensure that the information contained on this article has been obtained from reliable sources, Vizion Wealth is not responsible for any errors or omissions. In no event will Vizion Wealth be liable to the reader or anyone else for any decision made or action taken in reliance on the information provided in this article.
