Important Information About Financial Markets for Right Now

With the world in turmoil, we are once again sharing our thoughts and observations in the hope it will add some sense, clarity and balance during a difficult time.

Let’s start with a simple fact: the value of your investments will have fallen. If you look, a good expectation to begin with is that this will be true. That doesn’t mean there is a threat to your financial stability.

Another simple fact is that nobody, and we really mean nobody, knows how far this will go, when it will end, or what the broader ramifications will be.

The speed and magnitude of this event is impacting all asset classes. So far, we have seen financial markets pricing in information in a highly efficient manner (including emotion, which is also information).  This is what markets are supposed to do. The mere fact that prices are changing is evidence that markets are working.

For every transaction, there must be a seller and a buyer. Although the media is reporting the amount of wealth that has been “wiped off the value” of share markets, this fails to recognise that the “value” has, in fact, been transferred to a more patient investor.

Your investments feel no emotion. As human beings, we add the emotion and our behaviour through this period is critical to the longer-term outcomes from this event.

There is a volume of information flow never before seen during a global event such as we are seeing right now. During the Global Financial Crisis, the Apple iPhone was only one year old. 13 years later, it is estimated that 3.5 billion people have a smart phone and therefore, hold in their pocket a constant flow of information from myriad sources from all corners of the world, most of which they will never set foot in. All of this information feeds a series of emotional responses that we recognise can be extremely difficult to manage. Always remember you are the only person who chooses your actions, which again will be the largest determinant of the outcome for your life.

We are seeing cases of financial stress on business and economies that just three weeks ago seemed inconceivable. As an investor, diversification is key. Having your wealth spread widely across asset classes (shares and fixed interest), sub-asset classes, geographic regions and industry sectors remains the only proven defence against total loss through periods of extensive financial market stress.

We have taken the required action to ensure any withdrawals, such as pension payments, are being drawn from the defensive side of all our clients’ portfolios.

Any super contributions or other deposits being made are being invested in line with a recommended asset allocation. We are also applying a degree of judgement in each case-based on individual circumstances.

We are viewing this as a rare opportunity to participate as a buyer of assets that only a few weeks ago, were significantly more expensive. We are proactively working through the action to be taken on a case-by-case basis, with patience and balance at the centre of our activity.

The most important action for you to take is not financial. It is to look after yourself and your family through this time, both physically and mentally.

We are here to support you in that effort from a financial perspective. Therefore, we encourage you to contact us to address your concerns. In the meantime, please be assured we are being vigilant in our action and will contact you if there is anything important for you to consider.