What does COVID-19 mean for my investments – short and long term?
As well as the obvious public health and social impact of COVID-19, the pandemic is also having a major impact on the financial sphere. But, just as with the health and social factors, it’s not easy to understand the scale and nature of these effects. Not yet, at least.
These are unprecedented times filled with uncertainty, and that means it can be difficult to know how your short- and long-term investments are going to be affected. The virus has had immediate consequences for the global financial situation. Businesses have been forced to close and either furlough or let staff go. Travel restrictions have decimated the tourism industry and interrupted supply chains. All of which has caused markets to be volatile and panic to set in.
This has, unavoidably, caused some risk to stocks and shares in the short term but the key here is not to panic. There is room for optimism. Look around the world and we already start to see some of the worst hit areas getting back on their feet. China, where the outbreak started, is showing some tentative signs of recovery. Businesses are starting up again and people are going back to work.
It’s also worth remembering that coming into this crisis the economy was in reasonably good shape, which means it was well placed to survive something like this. If the pandemic had happened in the aftermath of the 2008 global financial meltdown it could have been much worse.
It’s also worth noting that plummeting oil and energy prices will also help to mitigate the worst effects of this period. When things do start returning to normal, low oil prices will effectively feel like a tax cut and the effects of this will pass along the chain. In addition to all of the above, the government stimulus packages such as furlough for salaried staff and grants for the self-employed have helped to minimise the damage.
So, what does this all mean for your investments? Well, you should expect a period of volatility in the coming months. This is a natural reaction to uncertain times. But this may soon begin to level off when we start to emerge from the lockdown period. The key is to try and diversify your investments to try and protect against these kinds of unplanned fluctuations. Build a portfolio of investments across multiple areas to try and protect yourself. But if that’s not possible, don’t panic and try to ride out this period.
In the long term, things will recover. The way we do business might change but the fundamental principles remain the same. Try and avoid putting all your long-term eggs in one basket and diversify.
If you would like more information about how to manage your money in these difficult times, or to speak to someone about how best to invest your money both for the near and distant future, get in touch with a member of our team.
Our specific services can help you to survive these difficult times. For example, some of our recent work has highlighted the importance of cash-flow forecasting, running ‘market crash scenarios’ as part of this insight. This approach helps to paint a picture of clarity for our clients and helps reduce some of the stresses around the unknown of financial planning. Get in touch if you would like to know more.
The value of an investment with St. James Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.