Weekly Client Update – 27th March 2020

Very suddenly, very clearly, we are living in unprecedented times.

In times like this, firms like ours can do one of two things. We can say nothing and hope for the best. Or we can communicate with our clients, give them the latest information and assure them that, whatever happens, we will still be here to answer their questions.

We have decided on the second course of action. And so, starting today, we are going to send out a Weekly Client Update.

The Weekly Update will be split into three sections:

  • The latest news on the virus and the moves that are being taken to combat it
  • An overview of world stock market performance over the week in question. Space may mean that we cannot comment on every market every week, but we will always give you the ‘highlights’
  • Lastly, our thoughts on the events of the week as we try to take a broader view and look to the future

The latest news 

When he was Prime Minister, Harold Wilson famously said that “a week is a long time in politics.” If it’s a long time in politics, then in the current climate a week seems like an eternity.

In the UK, we may not be living under quite the same lockdown conditions as France or Italy, but this week saw the Government pass the Coronavirus Act, giving itself unprecedented peacetime powers. Schools are now closed, all but essential shops have been ordered to close (many people will have been pleased to see off-licences added to the list of those that can remain open…) and the majority of us are making the most of the one period of exercise allowed to us each day.

The rules on social distancing seem to be gradually becoming understood and both industry and the public have rallied to Boris Johnson’s call for help. As we write this, the Government has ordered 10,000 ventilators from the Dyson company and more than 500,000 people volunteered to help the NHS in one day.

In Europe, Spain has sadly joined Italy in passing the death toll recorded by China and the number of cases in the US is increasing rapidly. By Friday morning, it had more confirmed cases than any other country. Earlier in the week, the US government passed a near $2tn (£1.67tn) aid package for business and the US economy, described by one US Senator as a “wartime level of investment in the economy.”

The stock markets 

The rumours of this US aid package had buoyed world stock markets even before it was actually announced. The markets are still down for the month as a whole and for the year to date. But perhaps this was the week we saw some light at the end of the tunnel as far as stock markets are concerned.

The only major world market that did not rise in the week was India, which fell by 1% as 1.3bn people went into lockdown.

Most markets enjoyed double digit gains, with France leading the way. The stock market there was up by 18% in the week to 4,432. The German and Japanese markets both rose by 17%, while the US Dow Jones index was up 7% to 21,201. Surprisingly, China’s Shanghai Composite Index has proved relatively resilient to the pandemic, rising a modest 2% to 2,782.

In the UK, the FTSE 100 index of leading shares was up 12% in the week, rising from 5,080 to 5,688. The pound rose by 2% against the dollar during the week, closing Wednesday at $1.1865.

Our thoughts 

Despite the rise in stock markets this week, it is easy to look at the above figures and start to worry. Let us make two points. First of all, many of our clients have very diversified portfolios: the falls in the FTSE, for example, will not necessarily be mirrored in the value of your savings and investments.

Secondly, world stock markets have historically always recovered in the long run. Clearly we cannot give specific financial planning advice in this update, but it is worth noting that whether it was Black Monday in 1987 or the financial crash of 2008, markets recovered over time.

A reasonable question is, ‘how long will markets take to recover?’ Very clearly, we’re in uncharted waters. All economies will technically go into recession and – whatever action the Government takes – some previously profitable companies will go out of business. There is, however, an interesting article in the Economist suggesting that some economies – it cites Singapore and South Korea as examples – could start to recover as early as the second half of this year.

The short answer is that we do not know. But we’re certain that when this is over – as it will be – there will be a renewed spirit of optimism and a determination to rebuild as quickly as possible.

And this week, we are already starting to see this with the industry’s rapid response to the need for ventilators, the huge numbers volunteering to help the NHS or the response of stock markets to the US stimulus.

We will send you another update next Friday. Until then stay safe, stay well, and remember that we are always here to answer your questions. We may be working from home, but we are never more than a phone call or an email away.