We are now all in a position where the COVID-19 virus is having an impact on our daily lives, whether personal or business. We are taking the opportunity of providing an update on the investment markets and our operational processes during this difficult period. As a business our key priorities centre on continuing to provide a high level of client service and providing a safe environment for our staff.
As I am sure you are acutely aware, the Coronavirus outbreak has brought with it substantial volatility in the investment markets, with the FTSE 100 showing a decline of 29% from the 21st February up until the close of business yesterday. The S&P 500 which is the main American market produced very similar results and is down 24% over the same period.
The reason that I make this comparison is that clearly here in the UK we do hear very much about the FTSE 100 and yet really the most important stock market in terms of share values is that of the US markets, as this drives the world economy. The FTSE 100 has been particularly hard hit due to its exposure to Oil stocks where the recent disagreement between Russia and Saudi Arabia saw oil prices fall significantly.
The investments that you hold have fallen in value however, it is important to remember that these are well diversified across many different assets, not just shares, as well as being geographically and sector diversified. Our analysis would indicate that most client portfolio’s where we have adopted a balanced approach have seen a reduction in the region of 7.5% over the past 12 month period and 15.5% in the calendar year to date. The reason that the 12 month figures look significantly better is because 2019 was a very strong year for the investment markets. I hasten to add this is based upon an average risk portfolio and clearly should your investments be more defensive we would expect them to have held up better than this and where there is more equity content the value may have fallen more than this.
For those clients that are taking advantage of our client portal they can access up to date values and information and if you do not have access at present and would like to take advantage of this then please contact us, and we will arrange access for you.
It is important to keep the financial implications of the current situation in perspective, we have suffered financial crises in the past with the last one being the financial crisis of 2007, the one before being the tech bubble in 1999 and most of us can remember the stock market crash in 1987. We will recover from the recent setback and we will I am sure face further events at some point in the future as it is part of the investment cycle which investors do need to accept.
Fundamentally, the suitability of your investments have not changed in the three weeks or so that we have seen the share markets fall. The uncertainty of how the Coronavirus will impact on the longer term growth prospects for individual companies and global economies has unsettled the markets. Investors do not like uncertainty, and this is why we have seen the significant fall in values. In reality, once we can see a resolution on the horizon we will start to see a recovery in share prices. In the meantime, there will be some companies, such as the airlines that will be particularly susceptible to a significant downturn in their profits and this may force some, particularly those that were relatively weak already, to fail financially.
The uncertainty is how long the Coronavirus will stay with us and how many companies will be damaged by these events and how this will impact on global growth, not just in the short term but over medium and longer terms. One thing that the past does teach us is that the investment markets are extremely resilient and that given some time they will recover and move forward once again.
It is, therefore, important to recognise that your investments are in the right places and are being actively managed on your behalf and that if at all possible we would like to avoid any significant withdrawals at this point to allow the assets that have fallen to recover. If you are making regular withdrawals from your investments that are at a level which is higher than you require to meet your expenditure requirements then it would seem sensible to reduce your withdrawals temporarily until we see the values recover. If you wish to discuss this point, then please do contact us.
In terms of our own plans here at Chancellor, the welfare of our staff are key and we do need to recognise that we may need a contingency in place in the event that we are unable to continue to operate from our offices. We have, therefore, put in place a strategy where all our staff can work effectively from home if this becomes necessary and we will of course keep you informed in this regard if we need to put these plans into force. You will be able to contact us by phone or email and we will advise you of any change in our working arrangements should this become necessary.
For the time being we will continue to work as usual and will be available if you would like to discuss your own arrangements or have any concerns.
Finally, we are also acutely aware that face to face meetings are inappropriate at the present time. We are, therefore, happy to offer clients meetings via video link or through telephone conferencing if you wish to discuss any aspect of your financial arrangements. We may be due to hold our annual review meeting and if this is the case we will contact you as usual to arrange this but also accept that you may prefer to delay meetings until the impact of the virus has receded when we can meet face to face. If you would like to take advantage of any of the alternative meeting methods, then please do contact us to arrange this.
I hope that this communication has put your mind at rest in terms of your investments however, if you do wish to discuss anything in greater detail please do feel free to contact your adviser, who would be happy to help.