Market Update March 2020: Markets Rise as Global Sell-Off Eases
Not to be out of the limelight for too long, Donald Trump rattled markets further as he delivered what may well be one of the most expensive speeches in history. The US President announced he was ordering an immediate shut-down of all travel from Europe to the United States from midnight on Friday to try to stop the spread of coronavirus in the US in an extraordinary address to the nation on Wednesday night.
‘We will be suspending all travel from Europe to the United States for the next 30 days,’ Trump announced, conceding that world health officials had now declared the health crisis a pandemic after insisting for days that it would ‘go away’ and urging Americans not to panic.
The effect was drastic, with the FTSE 100 suffering its biggest one-day loss since October 1987, and its second worst day ever as £191 billion was wiped of the index on Thursday.
To make matters worse, there are growing liquidity concerns in the US Treasury market meaning the usual flight to safety is not happening. Even gold, an asset that is favoured during times of equity market uncertainty fell 4% as investors indiscriminately sold assets amid the chaos. The FCA has also prohibited short selling of a raft of shares in Italian and Spanish firms, after a request from authorities in those countries for action designed to protect the companies.
In what was an all too predictable, but not unappreciated move, Central Banks have responded with further easing of the purse strings as the US Federal Reserve and The Peoples Bank of China both provided a liquidity boost whilst president of the European Central Bank, Christine Lagarde announced that that they “stand ready to do more” to contain any sovereign debt stress. The EU has also said it will put into place a package of measures, including a €37 billion investment initiative.
On a positive note, there does seem to be light at the end of the tunnel, even if Europe and the US are just entering the tunnel, as China, the epicentre of the global pandemic reported their lowest level of infections with just 8 new cases confirmed. This proves that with containment measures such as lock down, strict quarantine and travel restriction, it is possible for a country to rebound and do so relatively quickly. With pressures easing domestically, Chinese officials have now sent a specialist team to Italy to help control the outbreak.
At the time of writing, with markets fighting back today, buoyed by various stimulus packages and clearer battle plans to tackle the spread of the virus, volatility looks likely to persist in the shorter term and we will continue to monitor the market movements and keep you posted with any developments.
It should be noted, all Vizion Wealth client portfolios are being actively managed by a wide range of experienced and reputable investment fund managers across various asset classes. Each investment manager will be operating within their respective fund mandate and utilising a variety of strategies to position the underlying fund investments to take account of current market conditions. While market swings and volatility can be uncomfortable, it is important to maintain a long-term perspective in relation to investments as history shows us that selling investments after a significant market setback – such as the one we are experiencing now – is not usually the correct medium- or long-term strategy. In fact, such market falls often offer attractive buying opportunities for investment managers and investors, however, we expect to see more volatility in the short to medium-term.
Behavioural science shows that as humans, we make poor investment decisions based on emotions. We appreciate that staying invested during these concerning times can be disconcerting, but our advice is stay calm and don’t panic.
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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.