The answer to this is both yes and no.
COVID-19 poses a great threat to the health of us all and through this time, we hope all our clients are keeping safe and well.
The virus is having an extraordinary impact on the global economy. In spite of the efforts of Governments and Central Banks around the world to offset the disruption caused, financial markets have fallen significantly.
We are now in bear market territory. A bear market represents a fall of more than 20% in stock markets. By the 19th March 2020, the FTSE All Share index, which represents the value of all stocks listed on the London Stock Exchange, had fallen 31% from its peak over a period of just 55 days.
This leads us to ask, have we seen this kind of market event before, and if so, how does this compare?
The FTSE All Share index was first compiled 58 years ago. Over this period, we have experienced 11 bear markets, five of which have come in the last 40 years.
The losses we have experienced to date are not unprecedented. In fact, our expectation is for these periods of market stress to occur, and this expectation is built in to the recommendations made to all clients.
What sets this period of market stress apart from others over the previous 40 years is the speed in which markets have fallen.
This, we believe, is rooted in the cause of the crash. The impact of COVID-19 on the global economy has been swift, with numerous industries being asked to effectively stop trading for an indefinite period of time.
Where do we go from here?
At the moment, it’s impossible to predict how long markets will continue to fall.
To date, the measures put in place by Governments & Central Banks have been shrugged off by investors. Therefore, it will likely require news that the virus is under control for a turnaround to hold. What we expect over the coming weeks is for there to be continued volatility, with markets fluctuating up and down significantly.
We have positioned our clients across numerous stock markets and asset classes globally. The purpose of this level of diversification is to protect our clients in periods like these, preventing losses to the extent of those being experienced by stock markets. So far, we have been successful in achieving this.
When making recommendations to clients, we take a medium to long term approach (a period in excess of five years). This incorporates periods of market stress akin to that which we are experiencing. The rocky-ride may yet continue, however once the bottom has been reached, we expect markets to recover as they have following every bear market experienced by the FTSE All Share previously.
Our advice is for investors to not panic or make hasty decisions but to remain vigilant, patient and invested. Timing the markets is notoriously difficult. We are advocates of selling high and buying low, doing the opposite now could have severe consequences.