I trust that you are all keeping well in these challenging times, and like me, are looking forward to a return to the ‘new normal’ soon.
I wanted to start this monthly update with some positive news; something that I think has been sorely lacking in the last few weeks. After the historic drop across the global financial markets from mid-February to the end of March, we saw an upturn from these same markets in April. One of my bug bears is that mainstream media only provide the negative news in relation to investment markets. Therefore, whilst news outlets were letting people know how badly the markets were performing during this period, they were much quieter during April when the markets began to improve.
Statistically speaking, the FTSE 100 fell to a low closing price of 4,993.89 on 23 March 2020, but by 30 April 2020 the closing price had risen to 5,901.21, and even passed 6,000.00 the day before. This meant the index had increased by over 18% in this time period.
Throughout the same period, the Dow Jones Industrial Average (a stock market index that measures the performance of 30 large companies listed on stock exchanges in the United States) increased by over 19%.
As a result, these increases were reflected, to a degree, in your own investment portfolios throughout April. Of course, as you will be aware, your portfolio will not be wholly invested in these stock markets, but depending on your risk profile, will have exposure to varying degrees in the global markets.
Despite the increases that were seen during last month, there was still far more volatility than normal. During the last few years, seeing a 2% increase or decrease within a day was a rare occurrence. However, over the last few weeks, this has been very common. The impact of Covid-19 is still causing financial uncertainty, and as a result, it is in my opinion still far too early to suggest the worst is behind us. However, the positive returns throughout April has to be welcomed with open arms.
Another area that is likely to cause more uncertainty in the performance of your investment portfolios will be the increasing tension between the US and China. Before the current crisis, there had been some easing of the tension between the two over their ongoing trade war. However, in the last week or so, the Trump administration have been more and more vocal in their claims as to where the Coronavirus originated; coupled with President Trump sending numerous anti-China tweets.
This, along with some negative economic news at the end of April, has seen some negative sentiment return to the markets. As this is an election year in the US, and I think it is safe to say that President Trump would have pinned a lot of his campaign on his success in creating jobs and market performance, he will be looking to blame China for this current crisis. If this conflict continues, I predict this will impact global market recoveries.
To finish on a positive note, I believe that finding a treatment and/or vaccine for the virus would probably outweigh the negatives of a second trade war between the US and China, at least in the short term.
We are still open for business, so if you have any queries or concerns at this time, get in touch with one of our financial advisers today.
Stay safe and we look forward to seeing you again soon.
Richard Brazier – Director – Hanover Financial Management Limited