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Client Update: COVID-19 (Coronavirus) & Investment Markets

08 April 2020


Coronavirus update 4

As the Kerr Henderson team enters week three of working at home, daily routine is becoming more normal.

We can relate to tales of people and businesses adapting to the strange new circumstances and if we can be optimistic about anything, it is the ability of the human race to innovate and rebalance in the face of challenge.

In terms of our business, it is important for you to know that Kerr Henderson is functioning as close to normally as possible.  Many of us already had remote access capabilities to provide working flexibility, especially when travelling on business.  The main difference now is that nobody is travelling.  Obviously, one facet of our business that has completely changed is personal connectivity, but even here, when more than a phone call is needed, the use of video conferencing applications has enabled virtual meetings to be held very successfully with clients and colleagues alike.  As an aside, this also provides an interesting glimpse into the home life of our colleagues, including their choice of art, home furnishings, leisure wear and shaving habits.  We have even been introduced to various children and pets!  Some psychologists are already suggesting that such personal interactions will create a greater sense of community in the workplace when we return to the office.

Our primary concern remains the continued wellbeing of our clients and staff.  While some relative and cautious optimism on a possible slowing of the spread of COVID-19 in the UK and elsewhere has emerged in recent days, we all remain in challenging and uncertain times. 

Stock markets continue to reflect this uncertainty.  They began this week on the front foot, apparently determined to jump on any good news concerning the fight against the virus.  Potential ‘exit strategies’ from lockdown may lead to some normality returning to economies, but any marked change to the current restrictions does not appear imminent. 

As a path towards normality eventually emerges, markets will have more to base their decisions on and prices should settle on a clear direction.  Until then, we can expect markets to remain volatile while trading within a range which is - relative to the crisis so far - limited.

In the meantime, it is worth keeping in mind that a true long-term investment perspective should include both the future and the past.  Research published recently by BNY Mellon shows that stock markets have provided an average positive return of more than 29% in the first six months following the lowest point in a market cycle.* 

This helps demonstrate the following points:

  • Investors considering selling investments to “de-risk” or attempt to time the bottom may have missed out on potential market snapbacks when the bottom eventually did come.
  • Timing any market is extremely difficult; attempting to time the bottom of a bear market is nearly impossible.
  • While similar market conditions in the past have been uncomfortable, they have been temporary and have eventually rebounded.

In conclusion, while the word “unprecedented” is, with good cause, used regularly to describe the Coronavirus, the reaction of stock markets to the crisis is not without precedent. 

Planning for the future is almost always preferable to overreacting to the past.  If you would like to discuss your personal situation as we navigate these difficult times, please do not hesitate to get in touch.   

*Source:  Bloomberg analysis of S&P 500 Index covering post Second World War bear markets of 30% or more.

Important information: Investors should note that the views expressed are for information and this communication is not a personal recommendation for any particular investment or course of action.  Investment involves risk.  Past performance is not necessarily a guide to future performance. The value of investment, and the income derived from them, may fall as well as rise.  

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