Two weeks into lockdown in the UK and it is fair to say none of us know when things will return to normality, as we are in completely new territory, with Government, medical and scientific experts, economists, the media and media personalities all voicing opinion, well thought out and otherwise. The two main issues are firstly, and most importantly, protecting our population against this invisible and random virus and secondly, as we all know we will overcome, what will happen to our (and the global economy) and by default our investments and long term financial plans.
I am no medical expert nor do I claim to be one. The only thing I am confident of, is we will overcome the virus and once this happens Government will invest and continue to invest massive sums on research to ensure we are better prepared for the next pandemic, as for sure, there will be one. Hopefully a global body will be created where the best brains in the world can collectively fight future pandemic threats.
Once the lockdown ends there will undoubtedly be a sea change in how society runs. More and more of us will work from home and work more days from home. Business will review its need for large premises, preferring smaller alternatives and hot desk more as staff work remotely. This will reduce time spent commuting, enhancing work/life balance, reduce commuting traffic – cars, trains, buses and underground with the positive impact on global warming. Will we buy food more seasonally, more locally, increasing employment in our country? Will global trade fall if we source not just food but other purchases closer to home?
Make no mistake, things will be different, hopefully for the better.
As for our investments and long-term financial plans, let’s keep this very simple.
- To get a real return (one above the rate of inflation), investment in real assets is a necessity and as such value will fluctuate and could experience significant volatility, as we have experienced in the first 3 months of 2020.
- Volatility and portfolio corrections ‘come with the territory’ and as such should be expected. However, with every correction over the past 50 years, and there have been many, the last being the ‘Credit Crunch’ and with much bigger falls in value (1973 OPEC oil crisis saw falls of 70%+) than we are experiencing with Covid 19, recovery has always taken place within 2 years. Take solace from this and expect a similar reaction as not only the UK but Global Governments have all said they will do ‘whatever it takes’ to protect companies, jobs and the economy.
- The best advice is to be patient, still it out and wait for undoubted recovery in portfolio values. If you do not need your portfolio to provide income then you have less of an immediate concern. If you are relying on your portfolio for income, consider taking less than previous, pull in your belt if you can, call upon cash assets more whilst recovery takes place.
- Finally, and to offer some optimism. Warren Buffet has been sitting on a cash mountain for many years, waiting for the right opportunity to invest. “When everyone is timid that is the time to be brave”. His exact words. I say this not to encourage you to invest but to offer some reassurance that portfolios will recover.