IT goes without saying that we are living in times of great uncertainty.
It’s been the week that saw the UK Government announce its contingency plans, the World Health Organisation officially declaring Covid-19 a pandemic and both the FTSE and the European markets saw their biggest one day drop since the 80s.
The human brain really likes certainty, safety and security. It is no wonder that during these times, investors are asking ‘is now the time to buy or sell?’
Firstly, it’s important to look at what is being done to control this. The past week saw some significant changes taking place as global policy makers have intervened in an attempt to protect their economies.
The US Federal Reserve’s emergency rate cuts hope to encourage greater public spending, in an effort to stave off concerns of a recession.
Wednesday’s Westminster Budget turned attention towards the UK Exchequer, when Rishi Sunak, delivering the decisive action of a £30 billion boost into the economy, the biggest budget giveaway since 1992.
Sunak admitted that we are likely to be enter a challenging fiscal period. It’s also worth considering that some economic commentators are suggesting this it is likely to be temporary.
Naturally the fluctuations and market volatility may lead to confusion among investors. We continue to recommend investors hold diversified portfolios to cushion against tough economic times. Investments such as housing or retirement funds do well to weather such storms.
If Covid-19 has highlighted anything, it’s that it is impossible to predict the future. It’s worth remembering that our economy recovered from the previous downturn and, comparatively, the world players were in a worse state then than they are now. Hopefully this can be a reassurance to us as investors.
There is little need to panic and make fast sells if you’re in it for the long haul. For the really bold thinkers, the price of a ticket into the market has just got a lot cheaper, but we would urge those looking to take advantage of current drops to act cautiously when considering a quick buy which might not gain much value in the short term.
In essence, sometimes it’s better to do nothing than to act in a time of crisis. Covid-19 is unlikely to hinder the innovation and productivity which characterise long-term capital market returns, therefore patient investors should look forward to future returns.
:: Claire McCombe is wealth & investment manager at Barclays
