Please find below our Investment Market Update as at 27th March 2020.
Somehow, it feels a little uncomfortable talking about money when so many people are losing their lives and our daily existence has been turned upside down. However, we are in the business of helping people live the life they want, and managing investments and pensions is a key part of the choices we will be able to make in the future.
I’m sure, after this is all over, we will have changed, to some extent, the way we think about how we all function. For now, however, this communication is about giving you an insight into what’s happening on a week to week basis, whilst also providing a sense of perspective in this uncertain time.
Blue Sky Investment Market Update
The roller coaster of investment markets
On Tuesday of this week we saw the Dow Jones post its biggest surge in nine decades… yes, NINE decades! This just reinforces how dramatically markets had fallen, but also, the extraordinary amount of stimulus needed to deliver confidence to the global economy.
The Unites States and stimulus
I want to spend some time highlighting what has been promised in the US:
- A $2 trillion commitment on spending and tax breaks
- This includes a $500 billion chunk that can be used to back loans and to deliver aid to businesses
- Payment of $1,200 to most Americans
- $350 billion for small businesses to maintain their payrolls
- More expansive unemployment insurance
- Deferral of taxes
The reason for highlighting the US, is simply because the US is the largest global economy. Yet this stimulus, whilst being a ‘shot in the arm’, won’t prevent the roller coaster of uncertainty with regards to the impact of the virus on people’s lives, the medical establishments, businesses, economies and, of course, the markets.
Trying to second guess is not easy
On Tuesday, we saw the FTSE 100 rise by over 9% and in the first 90 minutes of trading on Wednesday, it rose by 4.5%. Only for it to be in negative territory by mid-morning, before picking up again to deliver a return of over 4% for the day. Significant swings.
Equity markets surge this week
I wrote earlier in the week about how the collapse in market prices suggested this was a good time to invest and this proved to be the case with the FTSE 100 climbing by + 8.53% (including this morning’s figures). I mentioned the McCarthy & Stone share price in the last update and since its low point earlier in the week, their shares have risen by over 70%. Better still, the airline Boeing has seen its shares climb 90% this week.
Little did we know the markets would react so dramatically, but it just shows how fearful they were over the uncertainty we find ourselves in. Clearly, we are not out of the woods yet, but for investors, the support that has been forthcoming should provide some comfort.
It reinforces what I said on Tuesday, in that investment markets are always looking ahead.
Whether we like it or not, many traders are ‘making hay’ on the back of uncertainty and are making lots of money. It’s their job I suppose, but it doesn’t help the mindset of the rest of us. That’s why it’s best not to look at your valuation too often… it’s not good for your mindset.
Yet, even the traders haven’t found this easy because traditional reference points such as historical precedents and data are of little use. Furthermore, the situation is changing so fast that any data becomes old news very quickly.
One year rolling returns
By way of context, below are the rolling year returns for the FTSE 100, and our portfolios. We have also highlighted the performance of individual holdings within the portfolios that we manage internally at Blue Sky:
FTSE 100 (without any costs and on price, not including dividends) = -22.53%
Portfolios, including fund costs and platform fees:
- Momentum = – 2.82%
- Sapphire balanced = -7.14%
- LGTV Balanced = -5.49%
- LGTV Sustainable balanced = -3.99%
With our individual holdings, they have been as follows:
- 7IM Balanced = – 7.29%
- UK infrastructure = – 4.63%
- Global infrastructure = + 1.64%
- L&G Multi index 5 = – 5.77%
- Health = +1.79% *
- Technology = +4.17% *
- UK smaller Companies = -18.68% *
- US smaller Companies = – 10.32% *
*These holdings are in our high risk Momentum portfolio.
As you can see, whilst all the portfolios are in negative territory over a rolling year, the impact, whilst not desirable, is not devastating. On saying this, we are acutely aware of the sudden drop in values over the last 4 weeks. It is indeed painful. Again, why you shouldn’t keep looking at your portfolios on a daily or even a weekly basis. Let us do the worrying for you!
Thank you for your patience during these difficult times. I’m spending most of next Tuesday, 31st March, discussing with our investment partners, their thoughts and strategies moving forward and I will share these with you next Friday.
Keep safe and well.
Gary and the Investment Team
Please Note: This communication should not be read as giving specific advice regarding your personal circumstances. This would only be given following detailed assessment of your individual needs. The value of investments may fall as well as rise; you may get back less than invested. Past performance is not necessarily a guide to future returns.