The current market and your investments: Should you be investing?
What we’ve observed
On 23rd March 2020, the FTSE100 hit its low point during the Coronavirus Pandemic, dropping below 5000 for the first time since 2011 (as we recovered from the last financial crisis) when concern was still focused on the uncertainty of the longer term global economic impact and developments of the virus in the US.
Roll the clock forward to just a little over one month, we see the FTSE100 in striking distance of the 6000 barrier, closing on 28th April 2020 at 5958.
With the word “recovery” not having been uttered so far, it looks apparent that a potential recovery is on the cards. Whilst investors in the market will have seen investments drop by as much as 35% due to Covid-19 since January, the March-April change has seen an equivalent recovery of approximately 16% (half the losses).
Has the investment opportunity been missed?
Whilst those investors looking for the right time to invest may have missed the initial spike, the opportunity for good returns may not be lost. In the month March-April, the FTSE100 delivered a 19.3% return from the low point.
Let’s look at a working example;
- On 23rd March, you invested £10,000 in a FTSE100 tracker fund
- At close of play 28th April, you made £1,900 from that investment
Is this the sign of things to come? the answer to this question is still open for discussion. However, considering this spike in performance as well as the news stories alluding to a softening of certain measures, the signs are generally positive but we must be aware of the potential for a second spike of infections and the impact this will have on the economy.
Does this mean I should be investing now?
If the markets were to recover to the pre-pandemic level, the FTSE100 will still need to reach over 7600. This would represent a further 27.5% growth from the current position. This means that real opportunity is presenting itself in the markets at present, therefore the ideal “buy-in” time may well be now.
It is important to remember the value of your investments can fall as well as rise and you may not get back the original amount invested.
Further to this, managed funds act differently to tracker funds and where a managed fund may well balance some of the loss and gains, a tracker fund will fall and rise in line with its indices.
We do fully expect some further volatility over the coming months but it is our belief that these market movements will be very much reduced when compared to those that have been experienced between January and March.
There will still be days or weeks where the markets tumble as news stories develop, but the swings are unlikely to be as drastic as previously experienced. However, by investing in the market sooner rather than later there is a good opportunity to benefit from any future “recovery”.
Advisers will always tell you that no performance is guaranteed and this sentiment is still true. However, whilst this is a risky strategy we are confident that an investment in the current market will deliver good returns over the medium to long term (5 years plus). This is especially relevant when you consider cash-based investments returns remain at all time lows.
What are your options to invest?
We can’t answer that question for everyone, however if you have savings that are now sat in 0% accounts and you want to review how these savings could be put to better use, now is the ideal time to speak with your financial adviser.
If you want to take advantage of the opportunities the stock markets are offering, call us today on 02380 920128 for a no-obligation review of your finances.
It’s important to remember that in regard to the example given above, whilst a new money investment could have returned 19%, any money previously invested will not have recovered at 19%. Firstly you will have had to recover the loss. During that period, the recovery rate was a little over 15% so there is still a way to go in recovering losses already incurred.