Investments update

Iain McGowan, Investment Director

In just a few weeks, it seems everything has changed. Across the world right now, we all share the same concerns about this extraordinary situation: the health and wellbeing of our families; the safety of our frontline workers and medical professionals; and for many of us, the challenges of working and educating our children from home.

At the same time, we know that the impact on the economy and investment markets has also been a major concern for investors and pension savers. If you have looked at your account in the past several weeks, you’ll likely have seen a notable drop in value resulting from this market turbulence. We know that can be very worrying, so we wanted to address some of the most frequently asked questions about the impact of the coronavirus on investments.

Top investment questions

  • What affect has coronavirus been having on investments?
    Investment markets (which include shares and bonds) began to fall in value sharply at the end of February as the extent of the coronavirus began to become apparent. Values have continued to decline over the past several weeks. However, as central banks (including the Bank of England) have cut interest rates, and governments announce stimulus packages (such as the $2 trillion bill proposed in the US), we have recently seen more up and down movements, rather than consistent declines.
  • Why is this happening?
    Markets are often driven not just by what is currently happening, but by what traders think might happen over the next few quarters. So the initial declines reflected the sort of “what if?” scenario we’re now seeing play out, as the global economy slows down significantly in response to containment measures. The following weeks’ declines were driven by the increased likelihood of a short-term recession.
  • How long will this last?
    The fact is, no one can say for sure. Certainly, we wouldn’t expect to see any significant improvements until there is evidence that containment measures are successfully “flattening the curve” and the number of new cases has peaked.
  • Should I be worried my investments are falling in value?
    It’s without a doubt a very anxious time for everyone, in so many ways. In terms of your investment or pension value, we would remind you that we are long-term investors, meaning that we take a view of at least 5 to 10 years out. While the investment markets have been turbulent, and will continue to be in the short-term, history tells us that staying invested provides the best opportunity for long-term outcomes. Markets have had dramatic declines before, such as the “dot com” crash and the global financial crisis of a decade ago, but have recovered over the long term in each case.
  • Should I look to move/sell my investments?
    While we can’t provide you with specific investment advice, we can remind you that staying invested for the long term delivers an opportunity for growth you wouldn’t have, were you to sell your investments or move to cash while values were low. That said, there are ways to adjust your investments according to the level of risk you are comfortable taking.

    We’ve created a video series around stock market fluctuations. The videos explain what market volatility is, and what options you have, should you wish to make any changes. We also recommend you speak to a financial adviser, if you have one.
  • What measures are we taking to protect investments?
    Please be assured that all of us on the investment team here at Scottish Widows, along with our strategic investment partners, are working hard to monitor developments and keep you informed.

This is an opinion piece by our Investment Director, Iain McGowan. We recommend that you speak to your financial adviser before making any financial decision across your pension and investments. If you don’t already have a financial adviser will help you find one near you.