The first Quarter of 2020 has seen the global COVID-19 pandemic result in equity markets falling from record highs to the fastest market drop in history. Followed by the best week on Wall Street since 1938.
Given the unprecedented nature of the recent market crash, all estimates and forecasts were thrown out of the window and investment managers have been left with a blank page. As the weeks have passed, the markets have seen high levels of volatility as investment managers work to price in the longer-term economic impacts and risks.
So what has been driving market sentiment?
China has begun to show strong signs the economy is re-opening and that life is returning to normal, as has a large part of Asia. Many are looking to the East for signs of how the future will pan out and, in doing so, see a path to redemption for those countries now entering a lock down phase.
The policy responses of Central Governments have been unprecedented. A few hundred billion here, a couple of trillion there and pretty soon you have a stimulus package globally estimated to be $7 trillion!
These factors have helped markets to find some stability, in what is, one of the most extraordinary periods of our generation.
That said, I would be hesitant to say we have seen the end of the crisis. There will, almost certainly, be some days where the news is negative and markets may move down again. As a large number of Company profits will be lower, many companies will cut or reduce their dividend payments in an effort to conserve cash. Others may look elsewhere for funding, such as shareholders or government bailouts.
However, as the information vacuum is filled, there is at least a basis for moving forward. As this happens and the view becomes clearer, we can begin to assess the outlook for individual companies and their prospects. In the meantime, we need to continually ensure that Investment Managers are assessing the robustness of their holdings and making changes where necessary.
Volatility is likely to remain high for a while to come yet, but most are hopeful that we have passed the point of maximum danger and most investment managers we speak to are now focusing on when is the right time to buy back in to the markets.
To establish this, there is much debate about the shape of the market recovery, and what letter of the alphabet this is most likely to resemble. Rather than the V shape recovery of a standard market correction, Economists have said they expect more of a Nike Swoosh shaped recovery. Either way, we are focusing on what is known already and assessing which investment managers are adapting best to the ever-changing economic environment.
If you would like to check your portfolio or speak to your adviser securely, please log on to our online Personal Finance Portal at: https://ebagroup.mypfp.co.uk/