Capital Markets and Portfolio Management
Over the past month, we have seen the introduction of Government and central bank stimulus at a scale not seen before. Financial markets have responded positively, with bond markets finding some stability and share markets also posting record daily and weekly gains amongst the otherwise negative movements.
Although it has been positive to see a rebound, we remain concerned about further share market volatility. This will almost certainly be driven by the emergence of news outlining the economic impact of the Coronavirus and measures being taken to preserve as many lives as possible. We saw an example of this late last week, with US jobless claims being reported at a level significantly higher than anticipated resulting in falls in US share markets.
Through this time, we have heard many people say things like “there’s not much we can do about it”, which we fundamentally disagree with. We are taking action and so can you. The simplest example of action you can take is to contact us to discuss concerns you have.
We are preparing to implement portfolio rebalancing through the course of April, which simply means to return a portfolio to its target asset allocation. At this time, that will mean using defensive assets (i.e. cash and fixed interest) to purchase growth assets (i.e. shares and listed property).
In some instances, we are also increasing exposure to growth assets. This is being implemented using a process called ‘dollar cost averaging’, which is about investing gradually over a period of many months rather than trying to pick the bottom of the market.
It is worth noting that an available option is to reduce exposure to growth assets. Although we might argue that now would be a sub-optimal time to make such a change, it is indeed an option and may well be appropriate depending on your situation. As you would expect, we will work hard to ensure that any such change is based on objective (rather than emotional) reasoning.
As the next weeks and months unfold, we will monitor all information available to us and continue to guide you through this period accordingly.