Coronavirus – Investment update 3rd April 2020

The week in perspective  

I hope this week’s briefing finds you well and looking forward to what I hope will be a warmer weekend with time to soak it up in the garden.  

This week, the graphs of the global stock markets continued to look like a cardiograph chart, albeit an erratic one. I’m looking forward to the return of boring days when markets shift up or down by less than a percentage point each day! 

As I write on Friday morning, all the European markets have opened down, quite possibly a reaction to the global coronavirus diagnosed cases now topping 1 million people and the realisation of the numbers of unemployed being created as confirmed by the US statistics yesterday. 

You may recall that stock markets rebounded last week, as numerous countries unveiled more stimulus packages to cushion the impact of the Covid-19 pandemic and after an average fall of around 33%, global shares pulled back 10% to 15% of this and although bumpy, have remained reasonably flat this week. 

We also saw the first sense of the economic impact, worse than any objective measure of expectations, but not bad enough to upset the markets any further on the days when this data came out.  

You may have heard me saying in the past that markets are forward-looking and the fact that they knew the global economy had effectively stopped, was one the reasons that they didn’t react as badly as you might have predicted. 

I think we’ve all come to terms that there will be some type of recession and in market terms, it’s the length of this that matters more than the depth of it. If the global economy can get back up to speed quickly, as was the prediction from economists in the earliest phases of this virus, then that need not lead to a particularly severe bear market. 

It’s been reported that Chinese factory output is recovering faster than expected, which is good news for the global economy. Let’s hope their traffic jams I mentioned a few weeks ago continue to get worse, putting the environmental impact aside for the moment.

We’ve also seen initial signs in Italy and Spain that the number of new cases is starting to fall. 

Also this week, there’s been various readings of the markets to see what confidence there may be and whilst, of course, it’s still pretty low, these numbers were not as bad as some might have predicted. 

Oil prices, of course, have been laid low by the spat between Russia and the Saudis and we’ve seen the benefit of this at the petrol pumps, and in certain areas this week you could fill up for £1.06 per litre!  

Anybody who uses oil for their heating would be advised to top their tanks up sooner rather later, as the price yesterday was less than 30p a litre, including delivery. 

Indeed, you may also have heard that there was a spike in the oil price futures yesterday of 23% and a resulting recovery in BP and Shell’s share prices, which followed Donald Trump suggesting that he has been speaking with his “friends” the Saudis and Putin to begin talks on oil production. 

Frankly, I believe for investment markets to settle we need to see a vaccine being developed and most importantly, the slowdown of both new infections and, of course the heart-breaking death toll from this indiscriminate virus. 

I’m indebted to one of our trading partners, Brewin Dolphin, for this week’s attachment and why you need to hold your nerve, remembering that there will continue to be short term shocks to the markets which you need to ride out when you’re investing for the longer term. 

Stay safe, keep well and do call us if you have any questions but please bear in mind that our normal times may be longer as we are all working from home.