Markets continued to have a volatile week but managed to claw back some of their recent losses. After a rocky start last Monday, equity markets rebounded strongly and as at close of business on Thursday, global equities were up circa 10% in the week. All major asset classes experiencing gains. While the week’s moves have provided some short-term relief, uncertainty remains. Today, Walls Street stocks rose on opening while European stocks fell as fears continue and we will see another very volatile week ahead.
There was a range of stimulus packages actioned last week. The Fed introduced rate cuts of 1.5% with unlimited quantitative easing, Bank of England cut rates by 0.65% and Bank of Canada by 0.5%. The U.S. agreed a $2.2tn spending package which is the largest in history. Germany announced a package of €156bn while Ireland’s package of €3.7bn was more modest but maybe expanded in time. The European Central Bank also committed to a bond buying program of €750bn which is designed to keep borrowing rates low for companies and countries during the crisis period.
Gold saw its best week since 2008 as the price rose by 11%. Oil continued its recent downward trend as the price war between Saudi Arabia and Russia endures, even in the middle of the global pandemic.
We do not believe that we have seen the bottom of the markets and the worst is probably yet to come. With respect to the virus itself, the U.S. surpassed both China and Italy in terms of the most confirmed cases in one country. Deaths also began to mount in Europe, with Italy and Spain seeing large jumps in that regard. No one can tell how long it will take to get this virus under control. This can possibly lead to a severe economic downturn. Markets will continue to be extremely volatile but will ultimately recover in the longer term.
As per our previous emails, we cannot insist that clients move to a fully defensive position right now. Many clients have requested a move to Cash and other defensive funds as a temporary safe haven, but are aware that they may lose out on the potential bounce back when equity markets turn. Remember poor timing is as big a risk as market volatility. However, every individual and every portfolio is different. Therefore, if you have any concerns surrounding your own individual portfolio and would like to reassess your current holdings, please do not hesitate to contact us.
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