Your update from Holden & Partners as of Friday 20th March.
Unprecedented is the word of the moment and this week was no different. We continued to see volatility in all markets across the world and sterling reaching multi-year lows. The government began giving daily televised briefings, a wartime measure that has not been seen in a very long time, with the chancellor announcing a stimulus and support package of over £300bn. Central banks were not far behind with a global coordinated effort to try and stem the flow. The Bank of England cut rates not once but twice in the space of a week, accompanied by an extra £200bn asset purchase programme (a mechanism to provide liquidity and support businesses). Both measures provided some relief to sterling and the markets.
In unchartered territory such as this, it is common to get lost in every piece of information and news that we are inundated with. It is important not to react to these, everything is changing quickly but it is vital now more than ever to hold one’s nerve – easier said than done at times, we appreciate.
With the potential for an increase in cases in the UK and across the world, the prospect of lockdowns exists and we will continue to monitor this. It is inevitable that this will, of course, have a further impact on the economies of the countries affected but also all countries across the globe and it will take a few months for the figures to present themselves in the data.
Sell-offs, as we are seeing now, are a normal part of market behaviour and a normal part of investing. We’ve seen 13 corrections (drops of 10% or greater from the most recent high) and 8 bear markets (20% or greater drops since the most recent high) in global equities in the last 40 years. That’s about one every other year. So hang in there. This will pass.
In all this madness, it is hard to see the positives. However, China has closed down its last coronavirus hospital as there are no longer enough new cases to support them, South Korea is seeing a decline in daily cases and clinical trials of a vaccine are underway not just in the UK, but other countries as well.
There is light at the end of the tunnel, but right now, the length of the tunnel is hard to see. It is times like this that sticking to tried and tested methods such as diversification and asset allocation is exactly what needs to be done.
As always, we are monitoring this constantly and will continue to keep you in the loop.
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