The impact of Coronavirus on your investments

Coronavirus and the associated lockdown have impacted us all. Whether through health, work, daily routines or our loved ones - most of us can describe how life has changed.

For those who invest, there has also been the added worry of how the stock markets have performed. Understandably many of our customers want to know more. There are two things worth considering:

During dramatic events it’s tempting for investment managers to make frequent changes to assets making up investment funds. On the other hand, the experienced investment managers at Coutts look beyond the immediate situation and use careful consideration before acting too hastily. As an example, they recently sold some European shares with a view to reduce risk, while continuing their patient and cautious approach to minimise costs and maximise potential returns in the longer term.

Times like these can also create opportunities, so the investment managers are ready to act if the right one comes up.

It’s easy to get caught up in recent events, but it is interesting to look back at some examples of big stock market falls in the past and what followed.

In 1987 Rick Astley topped the charts and Coventry City won the FA Cup. In October that year the American stock market index S&P 500 fell by 18% for reasons that have never been clear. The losses in America spread elsewhere. The stock market index FTSE 100 fell by 23% in just two days.

At the time, some believed this was the end of traditional investment gains.

But by the year 2000 share prices had recovered. The FTSE 100 had gone up by over 200% and the American S&P 500 had gone up by 400%.

But then there was more trouble. The Millennium Bug didn’t come to anything but the dotcom bubble burst. Share prices of technology companies had risen a lot in the late 1990s but then fell considerably.

Then share prices recovered again until the financial crisis of 2008 when they fell once more. From 2009 until Coronavirus hit, the trend has been mainly upwards.

While the history lessons are interesting reflections, this doesn’t guarantee what will happen following the Coronavirus situation. Past performance cannot be used as a guide to future performance and should never be relied upon in this way.

Source: Datastream. MSCI £ used for Equity, FTSE Brit Govt All Stocks used for Bonds, Sterling 3M deposit used for Cash. Returns include total returns and assume dividends reinvested, data to 28 February 2020.