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It’s not about timing the market, it’s about time spent in the market
In today’s low interest rate environment (and if it is at all possible, interest rates now seem to be getting even lower!), to achieve any growth a measured amount of risk has to be taken, meaning that part of your investment may be exposed to the world’s stock markets.
As a reaction to the Covid19 health emergency and the oil price war and the US travel ban the stock markets may continue to fall in the short term, but it is worth noting that the world’s policymakers stand by to cushion the impact of the virus. The Chinese central bank, the People’s Bank of China, has already taken steps to protect the economy & the US Federal Reserve dropped interest rates from 1.75% to 1.25% earlier this month and yesterday to almost 0%, the UK reduced from 0.75% to 0.25% this month. Other western governments may also follow these authorities in boosting spending, helping to further protect the global economy.
Global economic growth is still expected to be between 2-2.5% this year, with the potential for a rebound towards the end of 2020. The temptation is for investors to sell out now, however there is a clear risk of selling at the bottom and having to buy back into the market once stocks have rebounded.
From a more general perspective, the majority of fund managers encourage clients to ‘wait out’ the impact of the coronavirus. Any decision to move to cash/sell down shares needs two things to happen for the decision to pay off: 1) markets must continue to fall and 2) a decision must then be taken to reinvest before share prices recover.
Quilter Cheviot state “ As long-term investors, we believe in identifying fundamentally strong companies, and investing in them on the basis of their future prospects. Coronavirus will not alter the business model of the companies we invest in. It is not so much about timing the market, but time in the market, with long-term investors benefiting from steadily compounding returns over the years, as any chart of historic market performance will show. In the last 38 years, 27 have seen at least a 10% correction.- I would suggest each time we all had some clients panicking and suggesting going to cash. However, if you had stayed invested throughout the UK equity index has multiplied 17 times.
– We will, of course, continue to monitor developments on a daily basis”.
Paul Flintham, IFA
Beacon Global Wealth Management
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