It is at times like this that you realise the importance of being able to buy things.
There was a time in the past where it was easy to do so – but now that it’s suddenly more difficult, you wish you had stockpiled when you had the opportunity.
We didn’t know that all of this was going to happen, of course, but you do know that one day you will retire and roughly when that date will be. You aren’t now going to suddenly start stockpiling items for your retirement, because you don’t know what things you might need. However, you can stockpile the ability and resources, through money and equity, to buy things in future.
The good news is that right now the cost of equity has gone down, so now is a great time to set aside any spare cash you have for the future. It is also an opportunity to rethink how much you are currently setting aside each month, when you perhaps have more, for a time when you know that you will have less. Chris Jones, Proposition Director
The precipitous fall in equity markets and bond yields have thrown many portfolios off their strategic benchmarks, becoming underweight in equities and overweight in bonds. This has been followed by correlations turning positive, with a co-ordinated fall in equities and bond prices.
Valuations have been forgotten during this period of panic, much as they were amid the euphoria of valuation highs, which saw equity markets reach multi-year highs. Unprecedented support and targeted fiscal stimulus from governments and central banks seem to have little effect on sentiment, which fluctuates between panic and doom.
The credit markets remain a worry, in that the cash flow transfer mechanism may have a thrombosis, leading to defaults.
IG spreads widened 150bps and High Yield widened 400bps. The High Yield sector remains on edge as the capacity for repayment of these companies, fuelled by cheap money become suspect, with the energy, retail, aviation and tourism sectors being a particular concern.
Though many feel embattled and with parallels being drawn between now and wartime, one needs to be aware that the ‘foundations of production’ – capital, labour and land – are all intact and this is primarily a supply side slowdown as opposed to a demand-side one. The taps of production can be turned on easily. Abhi Chatterjee, Chief Investment Strategist
Read how one advice firm is managing the impact of Covid 19 and self-isolation here