Market update – 18 March 2020

Paul Niven – of our Multi-Asset team – offers an update on market events.

Paul Niven

Managing Director, Portfolio Manager and Head of Portfolio Management, Multi Asset Solutions

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Let’s talk about risk

The value of all stock market investments can go down as well as up and you may not get back the full amount originally invested. Past performance is not a guide to future performance.

If you feel you need specific investment advice that takes your individual circumstances fully into account, please talk to a financial adviser.

Views and opinions have been arrived at by BMO and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned. 

Recent days have seen a marked reassessment of the implications of the global COVID-19 pandemic. It is clear that the widespread and increasing social distancing measures which are being implemented globally will have a material impact on economic output and corporate profits. Indeed, many aspects of our everyday lives are fundamentally changing.  Working practices, leisure and social activities as well as our spending patterns have all been affected. We are truly living in extraordinary times and markets are rapidly adjusting expectations as to what this means for listed assets.

Let’s talk about risk

The value of all stock market investments can go down as well as up and you may not get back the full amount originally invested. Past performance is not a guide to future performance.

Recent days have seen declines in equity prices at an unprecedented rate. Indeed, global equity markets have moved from record highs into a bear market in the space of just a few weeks. We had believed that a bear market would require recession and, unfortunately, this now appears to be upon us. In response, recent days have seen widespread and aggressive action from central banks, with interest rate cuts and quantitative easing being restarted and governments, including that of the UK, announcing large fiscal programmes which seek to cushion the impact of widespread economic disruption.

There is little doubt that we now face a serious contraction in the global economy. This will place tremendous strain on both consumers and on corporates and there is a significant risk that the recovery, when it comes, will be impaired by the severity of the downturn.

Recent days have seen stress building in markets, and it may be that certain investors are now forced sellers, driving prices down in an indiscriminate fashion.

We cannot tell when the current crisis will end. Investors are questioning whether policy action will be effective in shoring up economies, as it has been historically. They are also closely monitoring the spread of COVID-19 and, here, there is some hope that a moderation in the pace of new cases in China and some European countries may indicate that containment measures are effective. Nonetheless, while the downturn will be painful, markets have moved a long way to discount the bad news which is yet to come on the economy and on corporate profits.

While the near term will remain challenging, we remain focused on long term opportunities for our investors.

If you feel you need specific investment advice that takes your individual circumstances fully into account, please talk to a financial adviser.

Views and opinions have been arrived at by BMO and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned. 

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