The Investment Landscape
- 31st March 2020
When we emerge the other side, earnings will recover and with interest rates low we expect markets to have long-term attractions.
As the virus continues to spread, global equity markets have been hit hard with many indices down 35% or more earlier this week. The prospect of an enormous support package caused a sharp reversal on Tuesday, but markets remain considerably lower year to date. As I write, the FTSE 100 Index is still down 25%. The uncertainty about the prospects for earnings this year is not going away any time soon. We may not have seen the bottom for markets but fiscal and monetary actions are substantial and should enable many businesses to come through the present crisis.
When we emerge the other side, earnings will recover and with interest rates low we expect markets to have long-term attractions. In the short term, as we get to the end of the quarter, we may see some support for equities as portfolios rebalance but we caution against chasing this move. Given our longer-term outlook, we are looking for opportunities to add equities selectively where good companies have been hit hard. It is noticeable that companies with quality earnings and funds that seek such investments have fallen less than the market as a whole. We have always favoured such investments and expect that they will come out of this better than those with weaker balance sheets will. We therefore continue to suggestive a selective approach to equity investment.
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