Necessity is the Mother of invention. A truer word cannot be said when a 4,000 bed hospital ward is being opened by the end of the week a full two weeks after it was planned. It really shows what can be done when we all pull together and put our minds to it. I think we are always quick to criticise in this country but are very slow to praise the work done by everyone involved in this fantastic achievement. I have a client involved in the planning and a friend involved in the building and I couldn’t be prouder of everyones efforts.
The markets have settled a bit this week with no major swings one way or the other so far. Its as if they are waiting for the next big news to see which way it will go. Will it drop further or is it poised to bounce back? The death rate in the UK was the worst yesterday with over 500 reported but the number of people reported to have caught the virus was appearing to slow.
For investments, it will be how long does the lockdown continue for and how many businesses will go bust during it? British Airways are about to announce that they are suspending 36,000 staff and surely more will follow as cashflow will bite.
So far since the turn of the year UK All Companies Index is down -29.11% but UK Gilts are up +7.65% so its not all doom and gloom. Most clients will have a mixture of asset classes to reduce the impact of losses.
New Tax Year
For some people the volatility in the markets gives a buying opportunity with funds at a low point. ISA season has just started again, and if you have cash, now would not be a bad time to buy into the market. Remember its £20,000 per person per tax year and you are not restricted to the same ISA provider as previous years. (you can have as many as you wish)
So, if your current ISA fund has lost -15%, and you have the spare cash, you could buy the same fund 15% cheaper. If and when the fund rebounds to its starting point your existing fund would not have lost anything in this downturn, and the new money would have gained +17.6%. Based on £20,000 it would have grown to £23,520.
As Ive said before, nobody rings the bell at the bottom of the market, but we just have to take a view when its relatively cheap. For me we briefly touched 5,000 on the FTSE 100 and since then we have traded at around 5500. So 5,000 is certainly cheap, but is 5,500. I guess the answer to that is ‘probably’. Its certainly 2,000 points cheaper than it was in February before all this happened. Time will tell, so talk to your adviser about their views.
For obvious reasons administration from all investment and pension companies is slower than it was and will be for some time. Therefore administration turn around times have all slowed down which is frustrating but cant be helped. Most companies have done as much as they can to smooth the passage through the system but be patient and it will all get done.
We as a team are researching investment solutions that have done well in the downturn and we will be reviewing our best buy panel when its all back to ‘normal’.
Anyway, stay safe and take care everyone.
Phil J McGovern FPFS
2nd April 2020